The Art Of Timing One’s Exit 

Benjamin Tillier, partner at Dedicated (© Pierre Liscia).

In the startup scene of Luxembourg, valuable lessons on timing one’s exit can be learned from the experiences of three seasoned entrepreneurs: Patrick Kersten, Chairman of Association, Raoul Mulheims, CEO of Finologee, and Benjamin Tillier, Partner at Dedicated.

Serial entrepreneurs emphasize the significance of aligning your exit with favourable market dynamics, seizing opportunities when they arise, and maximizing the value of your business. 

“There are lots of interesting companies in Luxembourg that will be acquired eventually if they play their cards right,” said Patrick Kersten, Chairman of Association. Kersten further adds that the timing of an exit must align with the stage of where a startup is, whether it be pre-seed, or any of the funding rounds.

Value creation leads to a successful exit

Building a sustainable and scalable business not only enhances your company’s attractiveness to potential investors but also creates lasting impact.“Sometimes in Luxembourg, the goal is a buyout, which requires your startup to reach a certain size. Aim from the start for something big,”said Raoul Mulheims, CEO of Finologee

An exit deal, or selling a stake in your startup, can lead to an entrepreneur giving up control of their startup. “An exit should be a win-win deal, if you are unhappy, don’t do it, you don’t want to be a minority in your business” said Kersten. Each round of funding requires selling a percentage of a startup, so it is advised to be cautious and to prioritize scalability, as this will increase a business’s net value.

Prioritizing scalability ensures proper expansion beyond the local market, and will lead to a higher-valued exit. “Selling too early or selling too late is a mistake, don’t sell when you know you can build more,” said Kersten. 

“Keep in mind that in the near future there may be competitors in the market providing more advanced solutions, so act accordingly when timing an exit.”

Raoul Mulheims, Co-founder & CEO of Finologee

Seize the opportunity

Entrepreneurs should be aware of the size they’re aiming for, and adjust expectations accordingly. The journey of entrepreneurship is as much about the exits as it is about the entrance, and mastering the art of timing is key to unlocking maximum potential. Kersten highlights that the companies that succeed are scalable, and entrepreneurs should remember that investors are constantly scanning for this characteristic as well as financial opportunity.

Benjamin Tillier, Partner at Dedicated adds that from experience, even if all conditions aren’t optimal, if a concrete exit opportunity presents itself, an entrepreneur should seriously consider it, while weighing out the pros and cons. “From the entrepreneur’s perspective, two conditions must be met for a successful exit: the startup’s net valuation should be as high as possible and there must be a buyer willing to acquire it at that value. If business results and industry trends push the startup into a high-value phase, but economic and market conditions are such that there are no potential buyers, there will be no exit of course,” said Tillier.

For an entrepreneur, a successful exit occurs when the company is sold under favorable conditions, primarily in terms of the company’s net valuation. Startups should also evaluate competition and market trends relative to their trajectory, as this could disrupt an exit when not properly adapting.

Adaptation is key 

Adapting to evolving technologies, market demands, and competition is crucial for a startup to maximize exit value. “Today your company might be very interesting because clients have adopted your solution, but keep in mind that in the near future there may be competitors in the market providing more advanced solutions, so act accordingly when timing an exit” said Mulheims. 

Ideally, entrepreneurs aim to exit during market upswings following periods of strong business performance, but sometimes these factors alone aren’t enough. “An exit will never occur if an investor doesn’t perceive the relative future value of the business and therefore the potential ROI,” said Tillier. This strategic timing capitalizes on high-value phases that accurately reflect the startup’s growth trajectory and potential, which will emerge when economic conditions, industry health and company performance align.

Unforeseen events and economic fluctuations can disrupt even the most opportune moments, reiterating the importance of considering solid exit opportunities when they arise. “There have been a lower number of exits in Luxembourg in 2022 and 2023. The reason that we saw a low number of exits over the past couple of years, is because the market was dead following COVID,” said Kersten. 

“Develop robust succession plans for key roles to guarantee operational continuity during an exit.”

Benjamin Tillier, Partner at Dedicated

Preservation from A to Z

Once a solid offer is on the table, entrepreneurs must carefully evaluate not only the financial aspect, but also the long-term impact on their vision, team, and legacy. It is essential to weigh the potential for growth, goal alignment, and the overall impact on internal and external stakeholders, including employees, and partners.

Preserving your company’s core values and culture throughout the exit transition sustains morale and performance, fostering a supportive environment during the change. “Not every exit involves a monetary exchange only, sometimes there are conditions associated, so know your conditions,” said Mulheims. Some exits require CEOs and staff members to remain onboard until an agreed point is reached.

“Develop robust succession plans for key roles to guarantee operational continuity during an exit. Focus on maintaining or enhancing operational efficiency and financial transparency and facilitate due diligence,” said Tillier. Align your strategy with market dynamics, value creation, and trends, to unlock the full potential of a mutually favorable exit.

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