Some startups are in it for the chance to become the next Apple or Google, while others wouldn't mind getting acquired by either of those companies. For the latter, there's Exitround, a San Francisco-based startup helping startups get bought up by the big names in Silicon Valley and beyond.
The guy behind Exitround is Jacob Mullins, who helped launch Microsoft's BizSpark program and has spent the last three years as a senior associate at Shasta Ventures working with startups Cherry, H. Bloom, Flywheel, and Liquidspace. Enter the "Series A Crunch." It's a phenomenon Mullins and others have observed, in which a wave of bright-eyed entrepreneurs who launched companies with angel funding and seed rounds struggle to get venture capitalists to cough up the multi-million-dollar Series A rounds their companies require next.
"For entrepreneurs at these startups their options are either extend their last round of funding, cut the burn and bootstrap, shut the company down, or look for an acquisition opportunity," says Mullins.
But even as these startup jockeys are struggling for their next funding, larger tech companies are struggling to find new talent in a highly competitive market. Mullins realized he could remedy both ills by connecting startups that are struggling to raise new funding (and are open to an acquisition) with companies that are in need of talent and have the capital to buy them. His finished product is Exitround, his own bootstrapped startup marketplace that launches today.
Google, Accenture, Groupon, Topix, and Threadflip have signed up as buyers on the site, now Mullins is opening the market up to sellers, but not just any fly-by-night outfit.
Startup founders who want in Exitround system are first personally vetted by Mullins and co-founder Greg Dean. To qualify for the marketplace, startups must have angel or venture capital backing, a team with deep expertise in their sector, and founders who have strong product sensibilities, says Mullins. Once accepted, they create a free profile with details about their company and team. That includes what the startup has built, how much money it's raised, and an overview of the team's skills and history. Discretion is extremely important to Mullins, so he anonymizes all the profile information on Exitround.
"It's not the nature of the entrepreneur to raise a white flag (and surrender)," says Mullins. "In order for the founder to feel comfortable with listing their startup on Exitround, privacy has to be paramount." That means when a corporate development buyer browses the site for acquisition opportunities they can only see what Mullins calls a "soup of data," which includes the number of team members, total outside funding, employee backgrounds and broadly what the company does, such as mobile app development or social media.
Mullins doesn't want to expose startups who might feel sensitive about their solicitation of an acquisition, so in the initial description of the company he's keeping some details hidden. So rather than a complete CV for every startup team member, prospective buyers will know that four people in the company for sale are ex-Google, three are python developers, and two are Stanford grads, but you won't know how those details fit together for each person.
When a corporate development buyer finds a company on Exitround in which they are interested, they make an introduction on the site. The founder can see who the buyer is representing, and if the founder accepts the invite, only then can the buyer see all the information about the startup. "Then, the normal corp-dev process starts," says Mullins.
To make its money, Exitround charges the buyer a fee when an acquisition is completed. "The thinking behind that is currently the talent shortage is so great, a lot of big companies have contract recruiters head-hunting at $35,000 to $40,000 per head," says Mullins. On Exitround, a buyer will only pay between $10,000 and $15,000 per person.
Mullins sees Exitround as an opportunity for startups that might not shop around for acquisition offers to have that option when the money runs out. He's also optimistic that it will open the doors for big companies outside the tech industry to find acquisitions they might not have known existed. And while his business is largely predicated on failure, Mullins ultimately wants Exitround to become a resource for startups that need guidance when Facebook or Google calls with an offer, or when an acquisition is the only lucrative way out.
With a somewhat perfect storm of big names like Yahoo, Google, and Twitter buying up companies at a fast clip in the last year, mid-level companies desperate for talent, and more early-stage startups popping up every day, the timing for Exitround could be perfect. In the current environment, Mullins believes that more companies will be forced to answer the question of 'what should I do when I can't raise another round?' "Exitround might not necessarily be the first option for a startup founder," he says, "but it at least gives them another option."
