Friday, February 15, 2008

Selling out to the Man

Since we began, we have been getting the occasional attempt at a negotiation to be bought out. A multi-national, a government agency and private investors were all at one point or another, interested.

This has often been at a time when I would have been more than happy to consider it my exit and move on to bigger and better things. Something out of Dubai. Unfortunately, none of them have yet to materialize.

In every attempt, I learn new things. The most important is this: Do NOT provide any information they could not gather on their own. The only time you can provide useful information is if/when they sign a non-disclosure agreement backed with a financial commitment. For example, you can say that your income is $X. They say, prove it. This means you now have to open your books. You say, fine, put $Y in an escrow account. If I prove it and you change your mind, you lose your deposit. If I don't, then no harm done and everyone goes back to where they were. Ideally, the deposit goes towards an agreed price to sell, granted that the figure you provided was true.

Many start-ups don't bother with audits, but they are more important than you may think. Even if you say to yourself, I only have 3 employees and no assets.. it's simple. No, it's not. An audit by a reputable auditor will allow you to throw around figures comfortably, knowing exactly what you have and don't. So, unless you come from an accounting background, budget for an auditor.

I have fallen to the trap of providing more information than necessary to people who were simply gathering intel. Thankfully this happened so early on that it doesn't matter now. However, it pays to have an exit strategy from the get-go.

This doesn't mean that you want to quit. It just means that you have to decide if this is what you want to do for the rest of your life or not. For a foreigner in Dubai, I hardly see myself wanting to give my whole life to a single country. An exit strategy is in the works!

3 comments:

Kyle said...

Well, I’ve read this entire label purely from an advisement point of view.

What’s interesting though is your last para about an ‘exit strategy’, leaning towards an obvious fact of not being bogged down in a single country for the rest of your life.

I agree especially when it involves challenges, treading into unknown territory and taming the bear.

We’ve just completed one whole year, so the question of an exit strategy is still a little early for us. Having said so, that particular strategy purely depends on the geo-political scenario that’s unfolding in this region.

As always, rumors are in abundance - now waiting for the smoke to clear.

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