Kevin Ryan is a prominent figure in the New York City tech scene, with a successful career as the founder and CEO of investment firm AlleyCorp. His experience includes involvement in various startups and companies such as Business Insider, Zola, Gilt, Pearl Health, Transcend Therapeutics, DoubleClick, and MongoDB. He has also been a significant force in transforming the online advertising industry, with Google acquiring DoubleClick for $3.1 billion in 2007. I had the opportunity to interview Ryan recently, where he shared valuable insights on company transformation for the selected startups in this year’s TechCrunch Disrupt’s Startup Battlefield 200 program.
The Startup Battlefield 200 program offers selected founders the chance to participate in pitch training workshops and exclusive master classes with VCs, successful founders, and operational experts. The virtual program aims to prepare and inspire these founders for their upcoming participation in the Disrupt event in October, where they will showcase their companies through exhibitions, demos, and pitches.
During my interview with Kevin Ryan, we delved into the decision-making process for company founders when faced with acquisition offers or the option to go public. Ryan emphasized that there is no fixed formula for making this decision. However, he outlined some crucial factors that founders should consider, such as prospects for growth, exit strategies, competition, and market conditions.
Ryan stressed the importance of being realistic about the company’s future prospects. Founders need to assess the company’s growth potential and its projected value in the next few years. This assessment should also consider the availability of other potential buyers and how the company is performing relative to competitors. Taking these factors into account helps founders determine whether holding on to the company with the aim of going public is a viable option.
Additionally, Ryan highlighted the significance of the time factor. Many people underestimate the time it takes for a company to grow and generate substantial returns. He explained that if a company is worth $100 today, it would need to be worth $200 in four years just to break even, considering risks, the cost of capital, and other factors. Therefore, founders need to align their expectations as CEOs. If they genuinely believe the company will be worth $300, holding on might be the right decision. However, if their projections fall below that mark, selling the company becomes a more sensible choice.
Ryan also emphasized the unpredictability of markets and unforeseen events that can significantly impact a company’s chances of success. Citing examples such as the Ukraine war and unexpected inflation, he emphasized that if markets suddenly close, companies can face a significant setback. This further highlights the need to carefully assess the risks and make informed decisions regarding acquisitions or going public.
Contrary to the popular narrative around successful companies that turned down acquisition offers, Ryan expressed that more founders should consider selling earlier rather than holding on for the chance to become the next big success story. He mentioned the example of Mark Zuckerberg turning down Yahoo’s $1 billion acquisition offer for Facebook in 2006. While such stories capture attention, in reality, there are numerous examples of founders who could have sold their companies earlier and achieved significant success.
Ryan argued that many founders fail to think clearly about personal wealth when considering acquisition offers. Instead of settling for a life-changing sum of money, they often chase ever-increasing figures, which can lead to missed opportunities or even a loss of everything. He stressed the importance of recognizing the value of what an acquisition offer brings and the potential for a transformative impact on one’s life.
During our conversation, Ryan gave an example of a founder who could sell their company and earn $30 million. He emphasized that $30 million is an extraordinary amount of money that can genuinely change someone’s life. Instead of holding out for more money, which may not significantly improve their happiness or lifestyle, settling for $30 million can provide the freedom and opportunities to pursue numerous endeavors. Ryan stated that while it may sound appealing to aim for $60 million, $90 million, or $100 million, the additional amount does not bring significant changes to one’s life.
In conclusion, Ryan’s insights shed light on the decision-making process for company founders faced with acquisition offers or the possibility of going public. It is crucial for founders to realistically assess their company’s growth prospects, market conditions, competition, and potential exit strategies. Ryan advises more founders to consider selling earlier, understanding the transformative potential of a life-changing sum of money. This perspective encourages founders to prioritize personal wealth and the opportunities it can bring, rather than holding out for ever-increasing valuations that may not have a significant impact on their lives.
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