David Frankel is Managing Partner at Founder Collective, a successful seed fund with investments in companies like The Trade Desk, Olo, and Coupang. With decades of experience as both a founder and investor, David brings a unique perspective to the often-misunderstood process of selling a company. He openly admits that many of his past exits were mistakes, which makes his advice on the topic particularly valuable.
He joined SaaStr Workshop Wednesday LIVE to do a deep dive with Jason Lemkin on his 10 Point Checklist when you sell your startup.
With IPOs becoming increasingly rare (especially in B2B since 2021), M&A has become the more likely exit path for most founders. While selling your company might seem like the ultimate success story, the decision is far more complex than most realize. David Frankel’s hard-earned wisdom offers a practical framework for navigating this challenging process.
Remember that patience is a luxury not all founders have, but those who can maintain it often see the greatest rewards.
The 10-Point Checklist for Selling Your Company
- Understand Buyer Motivations – Have conversations with potential acquirers before announcing you’re for sale to understand what they truly value.
- Commit Fully to the Process – Recognize that selling will be extremely distracting and require significant time commitment over 6-24 months.
- Manage Team Expectations – Balance transparency with the need to keep the team focused on building the business.
- Prepare for Deals to Fall Apart – Most discussions don’t result in completed deals; maintain operational focus regardless.
- Know When to Hire Professionals – Bankers and experienced M&A lawyers can significantly improve outcomes for deals of meaningful size.
- Consider Buyer Reputation – Research the acquirer’s track record with previous acquisitions and their M&A experience.
- Position as a Solution – Frame your company as the answer to the specific problem your potential acquirer is trying to solve.
- Secure Multiple Bidders – Competition dramatically changes the dynamics and improves your leverage.
- Maintain Financial Stability – A healthy balance sheet gives you the option to walk away—your most powerful negotiating tool.
- Assess Your Growth Trajectory Honestly – If you’re gaining market share with a great team and solid unit economics, carefully consider if selling is truly the right move
Understanding Buyer Motivations Is Everything
Before announcing you’re for sale, have meaningful conversations with potential acquirers to understand what they’re really buying. Different buyers value different aspects of your business – some want your technology, others your team or customer base. Pay attention to who they bring to early meetings – tech leaders versus sales leaders tells you everything about their intentions. Amazon’s acquisition of PillPack illustrates this perfectly: they saw value in both the complex software systems and innovative packaging that could transform their healthcare ambitions. Taking time to listen and engage with buyers before formally beginning the process can dramatically improve outcomes.
The Process Will Consume You – Be Prepared
Selling is extraordinarily distracting – far more than most founders realize. The process can stretch from 6 months to 2 years (MailChimp’s sale to Intuit took a full two years), requiring your top people to be deeply involved in diligence. The larger your company, the more delegation capability you’ll need. Many founders underestimate how the sales process takes on a life of its own, consuming focus and energy that would otherwise go toward running the business. Take baby steps, learn as you go, and be realistic about the commitment required.
Team Management Becomes Critical
There’s a delicate balance between transparency and distraction when managing your team through a potential acquisition. Leaks are inevitable as the process advances, but you can’t let your team start planning for their “post-acquisition life” prematurely. The default outcome should always be having a job at a growing company – remind everyone of this regularly. Being mostly honest with your broader team while framing discussions as “learning” rather than “selling” helps maintain focus and prevents the excitement of a potential exit from derailing operations.
Most Deals Fall Apart – Plan Accordingly
The hard truth is that most acquisition discussions don’t result in completed deals. Priorities change (even at the CEO level) annually at acquiring companies. Regulatory issues can destroy value, as seen with Amazon/iRobot. Leadership changes can kill deals instantly. Smart founders understand that “many a slip between cup and lip” is the golden rule of M&A and maintain their focus on building a great business regardless of acquisition talks. Companies often get sold in suboptimal situations because teams become too excited about an exit and lose operational focus.
Professional Help Matters More Than You Think
For deals approaching $100M, bankers become essential, though they’re valuable for smaller transactions too. They professionalize the process, provide a crucial good cop/bad cop dynamic, take pressure off the founder, and create testimonial marketing for your business. Having deal-savvy lawyers significantly improves outcomes as well. The exception? When there’s deep trust between CEOs, direct negotiations can sometimes work better. The relationship with the buyer matters enormously – having a trusted and respected relationship accelerates the chances of getting to the finish line.
Position Your Company as The Solution
Companies buy to solve specific problems – whether it’s filling feature gaps, catching up in the market, or recovering from missing quarterly targets. Your job is to position your company as THE solution to their specific problem. When potential acquirers mention “build, buy, or partner,” that’s often code for acquisition consideration. Focus your discussions on how you solve their particular challenge rather than just showcasing your company’s general capabilities.
Competition Creates Better Outcomes
Having multiple bidders dramatically changes your leverage in negotiations. Corporate development teams switch to “deal mode” when they know there’s competition, and bankers can minimize games on pricing with multiple offers. Even having just one other interested party can transform the dynamics of a deal. Remember that the best form of competition is simply continuing to grow your business – this maintains your negotiating position and provides alternatives if the deal falls through.
Financial Stability Is Your Best Leverage
Buyers can sense desperation when you’re running out of money. Smart investors give companies “breathing room” during sales processes because a healthy balance sheet dramatically improves your negotiating position. Running out of cash creates terrible leverage and often leads to unfavorable terms. Maintaining financial stability throughout the process gives you the option to walk away – the most powerful negotiating tool of all.
Honest Self-Assessment Determines Success
The hardest questions to answer honestly: Are you truly gaining market share? Do you have a genuinely great team? What’s your unit economics reality? Companies like Shopify and HubSpot IPO’d at valuations under $1B and now are worth $143B and $38B respectively – could your company follow a similar trajectory? This honest assessment determines whether selling is actually the right move. If you’re gaining market share with a great team and solid unit economics, you may never need to sell.
Founder Burnout Is a Real Factor
Many acquisitions happen around the 5-year mark when founders get tired and a decent offer appears tempting. The hard work of overcoming initial inertia is complete, and the prospect of a significant liquidity event becomes increasingly attractive. Before making permanent decisions, consider taking a three-week break or sabbatical. The power of recurring revenue is extraordinary – businesses can grow from $1M to $250M monthly even after being somewhat neglected if the underlying model is sound. Think carefully before selling what might become your legacy.
The decision to sell your company represents one of the most consequential choices a founder will make. By approaching the process with clear eyes and realistic expectations, you dramatically increase your chances of an outcome you won’t regret. Remember that patience is a luxury not all founders have, but those who can maintain it often see the greatest rewards.
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