07 Jun 2021
Leadership & Management
The pandemic has placed the start-up ecosystem in major transition, especially where entrepreneurship and leadership are put to the test. While many startups may be concerned with overcoming the crisis, it is equally important to keep in mind the end game – exiting, as this demonstrates the founder is prepared to lead through all company stages.
“Whilst it is counter-intuitive to think of exit at formation, now is the ideal time,” says Piyush Kharbanda, Partner, Vertex Ventures SEA & India (VVSEAI).
To be ready for exit, founders must not neglect the process of building a great company where this greatness must be emanated via the firm’s leadership, network-building, creation of company culture, identifying niches and leaving a lasting legacy. Once these are achieved, founders and their startups will be better positioned for exits, although knowing when to do so exactly requires cognisance of macroeconomic factors as well as considering how the company will be placed post-exit.
Building a great company
Having a great and motivated CEO and leader
Great companies need great leaders which, according to Chua Kee Lock, CEO of Vertex Holdings, is “someone who is driven, has direction, mobilises people to get things done well, listens, connects the dots, sees the big picture, communicates well, inspires people, builds a cohesive team, imbues a strong performance culture, and leaves a lasting legacy”.
A good leader is also motivated, especially those who can inspire others with the company’s vision and purpose – as this helps create an engaged team with impacting success. “I love what I do, I work with brilliant and passionate people, I really enjoy my job!” says Prajit Nanu, Co-Founder and CEO of Nium, a global financial services platform.
The journey of company building is tough and bound to have its highs and lows. “Entrepreneurs sleep just like babies. We wake up every three hours crying,” says Roshni Mahtani Cheung, Founder and CEO of theAsianparent, Asia’s largest parenting community and content platform. In moments of crisis, it is important for CEOs to be honest with employees and let them know that the company is going through a tough time instead of being emotional.
Strategically building your stakeholder network
We previously covered why it is important to choose the right investors and Prajit affirms that such an investor should not be a fair-weather “spreadsheet warrior” but someone who can stick with the company in good and bad times.
Still, it is vital to establish a positive relationship with investors. For Roshni, it is especially important to give them what they need at the capital table.
Additionally, Kee Lock advises founders to know when and how to manage their investors, being mindful that it is also a learning experience for them. “Founders have to figure out which 50 per cent of what the investor says is right and which is wrong; they can agree or disagree, but within reason,” says Kee Lock.
Instilling a great culture
To create a good company culture, a team with a shared purpose is a good base. “If you have a passionate and devoted team obsessed about creating a great product, this is the best,” says Vinod Muthukrishnan, former Co-founder and CEO of CloudCherry, a customer experience improvement solutions provider which was acquired by Cisco in 2019.
Similarly, Roshni notes that “the team should believe in you, that what you are doing is meaningful to make the world a better place,” before adding that to maintain such a positive culture, communication is the key. “Even if you have communicated, communicate even more,” says Roshni.
Meanwhile, the quality of communication is also important to be open and transparent, says Prajit. “Let everyone ask you as many questions as they want. You should, in turn, listen and avoid wasting time – if a call can take two minutes instead of thirty, make sure the communication is clear and direct.”
Finding a niche, gaining traction and leaving a legacy
When developing a product, startups should determine their niche by looking at the market, understanding the ecosystem, value and opportunity. “Decide if it is a lifestyle or global business. Can it stand on its own? Can you expand it?” says T. Fuad, former CEO and Founder of co-working community Spacemob (acquired by WeWork), and now CEO of Pace.
After finding that niche, the company must remain flexible to pivot. A case in point was CloudCherry, where the company moved to the US to cater to an underserved market and found itself competing with two unicorns. Vinod notes whilst the product might stand apart, founders must show traction to demonstrate demand.
Startups must also have a long-term mindset about their company, even beyond exits. “Think about a legacy, something that benefits society as a whole,” says T. Fuad. For Piyush, this longer-term view also allows for various exit opportunities. “You can build for an IPO but keep your exit options open.”
Knowing when to exit
Determine if the conditions are right
“In the formative phase, establish contact with the CEOs of all the companies that might acquire you to build trust. At the blitz scaling phase, think of going for an IPO,” says Piyush.
The exact timing could be a matter of instinct. According to Vinod, it also requires a “reading of the tea leaves” and asking oneself if they have the resources, spirit and money to continue. He thus advises founders to look at the macroeconomics and be aware of the buyer’s perception of the urgency, as what could be valuable now may not be so in six months.
Entertain offers “at the highest of the high”, when business is good whilst being aware of other, non-IPO options too. T. Fuad explains that these are (a) companies who are making investments into the region, ‘taking out the threat’, (b) offerings for your localised product and services or (c) an ‘acquihire’ - if you have a ready team that can fit into another company.
The importance of managing the process
Exit management is important and Vinod advises dealing with it transparently and directly “in good spirit” with all parties whilst optimising for valuation, culture, team fit and a future roadmap. He notes that the order of priorities should be the employees and whether they are happy, then the shareholders, and finally whether this is the right ‘fit’. If all those are satisfied, the founder should be happy too.
Finally, be aware that as the process might be stressful, a founder’s support community would be beneficial. “Not many people talk about how lonely the journey is,” says T. Fuad, while Vinod advises it is good to “pace yourself mentally and physically”.
Always keep an eye out for an exit
Exits are important from an ecosystem perspective as it breeds innovation and technopreneurship. A company primed for exit has great and motivated leadership, supportive investors, a transparent and communicative culture, product niches and market-fits, as well as the ability to generate traction for validating customer demand.
Besides building a great company, founders must think for the long term and of leaving a lasting legacy that helps build an infrastructure ready for exits. In deciding the right time to exit, relying on instincts and macroeconomics are both important, as is being aware of the variety of exit options available.
Watch the full video recordings below.
Technopreneur Webinar Series #5: Building Great Companies
Technopreneur Webinar Series #11: Keeping An Eye Out For Exit
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15 Jun 2021
News & Announcements
Here are the latest updates on the portfolio companies across the Vertex network.
06 Jun 2021
News & Announcements
Character is key, and the decision to invest in a firm rests partly on the personality of its founder. Our Vertex Holdings CEO Chua Kee Lock recounts and the early days of dealing with Grab’s co-founder and CEO, Mr Tan, and why he considers Grab an iconic win. Vertex has substantially exited Grab, reportedly making about 10 times the USD 14 million or so it had put in over various stages for about a fifth of the company.
25 May 2021
Product & Technology
In this digital age where advanced technologies such as Artificial Intelligence (“AI”) and Cloud Computing (“cloud”) are easily accessible, startups may consider leveraging these technological solutions to transform or add a competitive edge to their businesses.