Say you have just closed your first venture capital investment round. Great! And amazingly enough, you receive a pretty good offer for selling the company after 6 months. What do you do?
In the best of worlds, all shareholders including founders and investors agree on that either it’s a good or a bad idea to sell the company at this point. But in many situations, founders and investors may have different views on whether it would be nice to cash in.
In these and many other situations it is extremely important that owners are aligned on what the agenda for the company should be. If not, it is hard for the board and the management team to know in what direction to steer the company.
A great, yet simple tool for this that we use at Creandum is something we call an ownership plan. Before or during the investment we sit down with founders and other owners and pin down how we see the development of the company. We try to identify the key value events and risks in each phase. As an example, it could be whether the company should aim for expanding market share on its local market versus entering a new market. The ownership plan should give an indication of when it’s time to raise new money or what needs to be achieved to reach an satisfactory exit as well as the size of the exit aimed for. And although things change on a frequent basis and plans must be revisited and rewritten, it really helps having a mutual over-arching idea of where the company should be going and to know when the various owners are willing/satisfied to sell their shares. Are we building a ten million euro company or a hundred million euro company? Naturally, it will take more money and possibly more time to build a much more valuable company.
The format of the ownership plan can be different from one case to another. The important thing is to mutually identify and agree on major value creation events and on the owners’ agenda. Anyway, I have prepared a very simple fictious example for an enterprise software company just to make things a bit more concrete.