In this video, Adam McIsaac shares his experience in selling his startup and offers advice to anyone else trying to navigate a micro-exit.
[0:00] Navigating Micro-exits: A Founder’s Journey From Decision to Close — with Adam McIsaac
My name is Adam McIsaac, and I was previously the CEO and co-founder of Robin. Robin was a corporate entertainment platform and Robin was acquired in 2020.
[0:18] What is a micro-exit?
A micro-exit … That is not an official term. That’s kind of a made up term of a small exit. You can call it an acqui-hire. You can call it a soft landing. But typically, how I define it is an exit that is below five million in enterprise value. So it doesn’t do a great return for everyone involved, but it’s more than zero.
[0:42] Can you discuss the moment that made you realize you needed to sell your business?
There were many moments along the way where we, we had challenges with the business, and we were really looking for the best path forward. We fell out of love with the business is a big part of this, emotionally. We just no longer enjoyed coming to work every day. Also for us, the pandemic was truly challenging. If you build a corporate entertainment platform when no one’s entertaining clients, it’s really hard to keep a business going.
[1:18] What motivated you to take the step in selling?
It was, it was really as a team we discussed this, and we all agreed that the best path forward was to try to find an acquirer. And then, after speaking to investors and advisors and building consensus, we really had the confidence that, it was the best way to go.
[1:37] Run us through the process between preparing to sell and closing.
First is you have to make, make peace with it. This, this fact that, perhaps you’re getting off at an earlier stop on the journey than you had originally planned to. Next is build a consensus with the team, investors, and advisors. Three is make a plan, is ultimately decide how you’re gonna go about this.
Four, unless you’ve got acquirers knocking down your door, is you really have to do the work. So build a list, run a process, identify high probability acquirers for you based off of criteria. Run your process much like you would a fundraising process. Get offers is, like, the key part of this. It doesn’t matter how good they are, how small, it’s just get offers and then use that as a point of leverage to get more offers ideally.
And then you have to run through diligence, and you have to actually put the work in to provide the potential acquirer with as much information on your business as you can. At the same time, you wanna do diligence on them if you’re able to, to just figure out is this a place you’re going to be happy especially if you have to stay on. Then there’s negotiating as well, final terms, dealing with lawyers and defaulting to lawyers of their expertise. They’ve done this a hundred times. You’re doing it probably for the first or second time.
And then it’s getting it across the finish line. This is something that is talked about where, ninety percent of the time goes, before getting it across the finish line, but ninety percent of the effort is actually getting it through that last step. And then there’s making a plan post-acquisition. What does this mean for you, your team, investors, advisors? And, ultimately, what are you trying to achieve upon acquisition? And then what are the expectations of the acquirer of you?
[Summary list on left side of screen reads the following: 1. Make peace with it; 2. Build a consensus; 3. Make a plan; 4. Find acquirers; 5. Get and leverage offers; 6. Due diligence; 7. Negotiate final terms; 8. Cross the finish line; 9. Make a post-acquisition plan.]
[3:32] You have said that knowing you want to sell isn’t the same as giving up and that pursuing a sale requires confidence. How did you maintain your confidence throughout the selling process?
Knowing to sell is not the same as giving up. And, it is important to maintain confidence throughout the sales process. For us, it was a journey. There were were times when we started confident, then we lost confidence, and we only regained confidence by talking to other founders and others that had been through this experience before.
You also must realize that in your business, you probably built something of value. It’s either the team has value, the product has value, the customers have value. You need to identify acquirers and understand how much value that means for them. So it’s very much kind of a fluid process, but it’s important to stay confident to know that you’ve done good work in in the past, and this is just another chapter of the journey.
[4:32] How did you go about breaking the news to your team? What worked to get them on board?
This is funny. The team was completely aligned around this. We were all emotionally spent, financially stretched. It was not as if it was a surprise for anyone on the team. And once we expanded this discussion to include advisors and investors, everyone but one was incredibly supportive and incredibly encouraging of this. Truth be told, if you’re doing updates with your team, with investors and advisors, they probably know that the business is not really taking off like a rocketship, and they’re gonna anticipate that you’ll probably look to do an acquisition or a micro-exit at some point.
[5:13] How did you manage the emotional journey of saying goodbye to something you helped build from the ground up?
Truth be told, by the time that we decided to sell, it was more of a burden than it was a project of love. So I do think although we had invested sweat, time and energy and money into the business, we were ready to get it off of our back. We did find that it was limiting us professionally and personally, and we got energized thinking about the next chapter, working with the acquirers to potentially build the business bigger, and then also moving on further down the road of being able to build something else that we were, again, excited about. So our experience was, we love the business, and then we actually fell out of love with the business. And then we fell in love with the the idea of pursuing an acquisition.
[6:03] What was the aftermath of the sale? How did you ensure a smooth handover?
The aftermath was great, the team was emotionally relieved that we were able to find an acquirer because of the pandemic and the types of businesses we were targeting. And then the handover, it really became about us and about the products we had built and the customer base. And this was not an acquisition where we left. This was kind of an acqui-hire on steroids where we participated. We stuck around for two and a half years inside the acquirer. That acquirer was actually acquired as well. So, it’s been a tremendous journey. And as well, it is like we looked at this as a fresh start of coming into a new business as a startup pod that could act as internal consultants and could really figure out a product strategy to help them achieve their next goal. So, the handoff from our side was really smooth, and I think the acquirer was really happy with the, with the turnout as well.
[7:06] Knowing what you know now, is there anything you’d do differently? What advice would you give to other founders who may be thinking about their own exit strategies?
First thing I would do now is build a better business. Right? That makes everything a lot easier. But in the absence of that is really just speak to other founders. Speak to other people that have been through this, that have run a process. It can be pretty lonely to try to get your business acquired when there’s no one knocking on your door to acquire it, but others have been through this journey. So speak to advisors, investors, other founders within your network, and really ask as many questions as possible. And you’ll be able to plot a path forward. You don’t have to do this alone. You have your team, and you’ve got a great community of other founders, especially here in Toronto.
[7:52] Finally, why do you believe that it’s important to openly discuss these challenges?
I’m personally a huge basketball fan, and every season, only one team wins. Does that mean the other teams are actually failing? No. There’s a lot of good stuff that happens. So even though the outcome might not have been the success that you had originally thought of, talking about failure helps others understand that the challenges within their journey, in that moment, it might feel like a failure, but you need to think about the long run. And it’s all ups and downs. So, I really, really think that this posturing around success and only talking about the good times does a disservice for the founder community. I think it’s much better to talk about the low times and challenges and the failures as well because then it makes the successes all that much sweeter.
[8:43] In summary, when navigating a micro-exit you should:
Music by Jonas from Pixabay