Microns: New Micro Startups For Sale 🚀 - Different Deal Structures

Oct 28, 2021

Salut!

This week was great.

I got cosmetic braces. Helped to sell a few startups. Worked on the website and read different articles and newsletters.

Today, I will tell you how to customize your deal to make it more appealing for buyers. This information would be helpful for both buyers and sellers.

Also, I will share a tactic that one of the sellers used to sell his project this week quickly.

P.S. Do you know what language I said "hi"?

👋 Welcome

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ℹ️ Different ways to structure your deal

Before we dive deep into different structures, let's learn what deal structure is.

Deal structure is just how the buyer will pay for your startup and your responsibilities as a seller during this process — negotiated upfront by two sides.

Simple, heh? Okay, let's start with different examples.

The first one is called all-cash acquisition. Yeah, it's when all cash is paid upfront. It's the most popular deal structure on the Microns and my favorite one.

It is an excellent strategy if you plan to focus on another startup, and you need some capital for this. Or spend some time with your family or take a vacation.

But don't forget to have a post-acquisition plan. Keep in touch with the buyer and try to be helpful over the transition period.

P.S. Don't forget to use the Escrow service.

The second one is called down payment + financing. It is mainly used when the startup is complex or the buyer doesn't have the amount you are looking for.

For example, you found a buyer that loves your startup and wants to acquire it but doesn't have the needed amount. So what will you do?

You can structure the deal the following way. First, propose 70% cash upfront and then 30% as seller financing when the buyer pays you monthly payments over a fixed period, basically from 3 to 6 months.

You can use this scheme to reassure buyer and make the acquisition happens smoothly. In addition, during this period, buyer counts on you and can consult about different parts of your business.

The next one is called down payment + equity. It is used when you don't want a clean break with your business.

If you believe in the buyer's proven track of 10xing your startup, it could mean more money in the long term.

The buyer can have you in the startup for some time. You can help him close some gaps by consulting.

If you purchase any equity, there are also high risks. So do your due diligence on the buyer before closing.

The last one I want to cover is called down payment + financing + earn-out. It is used when the buyer has all money but doesn't want to pay all at once. The buyer worries about a lot of things, from valuation, operations to competitors.

You already understand what is down payment and financing. Let's cover earn-out. So, to be short, earn-out it's just a milestone you should hit to get financing.

You set the goals for the month and, based on the results, get monthly payments.

It will give more trust to the buyer but also keep you in the business for a while. So, you should decide if you want to exit clean or keep running your business for some time.

Summary

We have covered a few ways you can use to exit your startup comfortably. However, every startup is unique, and there is no silver bullet.

You should decide what would be comfortable for you. For example, do you want to stay in the company or leave and get all cash?

Decision on you.