Kevin Ryan, a prominent New York tech investor and serial entrepreneur, shared his insights on company exits and how founders should decide when to sell their businesses during a recent interview at TechCrunch Disrupt’s Startup Battlefield 200. Ryan, known for his leadership roles at companies like DoubleClick (sold to Google for $3.1 billion) and MongoDB (which went public in 2017), is also the founder of AlleyCorp, an investment firm that has backed numerous startups.
In the interview, Ryan emphasized that there is no one-size-fits-all formula for deciding when to sell a company. However, he outlined key considerations:
- Future Prospects: Founders should critically assess their company’s growth trajectory and market conditions. “How much are we growing, what will this company look like in three years, and what are our exit strategies?” Ryan advises, encouraging founders to avoid being overly optimistic or delusional about future potential.
- Time Factor: Ryan stressed the importance of understanding the time value of money and the risks associated with waiting too long for a bigger valuation. He explained, “If we’re worth $100 today, in four years it’s got to be worth $200 just to break even.” If growth doesn’t justify the time and risk, selling might be the smarter option.
- Market Unpredictability: Markets can change suddenly, as seen with unforeseen events like the Ukraine war and inflation. Ryan warned that holding out for higher valuations carries the risk of missing out if external factors affect the market.
Ryan also highlighted the personal wealth aspect of selling early. He mentioned that many founders chase increasingly larger numbers instead of settling for an acquisition that could already be life-changing. “$30 million is an incredible amount of money,” Ryan noted, adding that the difference between $30 million and $60 million doesn’t significantly change one’s happiness, but the jump from $0 to $30 million is substantial.
Ultimately, Ryan believes more founders should consider selling earlier, instead of holding out for the next billion-dollar valuation. He encouraged entrepreneurs to think realistically about their company’s future and to weigh the risks of turning down acquisition offers.
