The Exit You Want For Your Startup Should Affect Your Growth Plans
Did you start your startup to sell it, or IPO? While you don’t need a concrete, immovable answer, serial entrepreneur Noel Webb says you should have an idea from the very beginning how you want the story to end. Speaking with TechExit.io, Noel shared more about why the exit you want for your startup should affect your growth plans.
- When you know what kind of exit you’re seeking, you need to embed that trajectory into your growth plans.
- How you grow will also depend on the type of business you run—there is no guaranteed playbook.
- Keep in mind the best businesses to be acquired or IPO are also strong businesses in their own right—your exit goal should be part of the conversation, but you still need to build a strong business.
Choosing what kind of exit you want might seem hubristic when you’re still early-stage or finding product-market fit.
That said, having an idea of how you want your startup journey to end is essential to your planning—it’s a simple fact that you’ll need to make different decisions if you want a healthy 7-figure sale compared to a multi-billion dollar IPO, for instance.
After building and exiting two companies, most notably selling Karen HR to Alexander Mann Solutions in 2019, Noel Webb has seen this firsthand as a founder.
Speaking with TechExit.io as a Steering Committee member, Noel shared more about the inner workings of building Karen HR—and how knowing he wanted to exit the company affected his decision-making.
Embed your trajectory
When Noel co-founded Karen HR in 2017, in the back of his mind he thought about exiting the company at some point. Rather than a big IPO, he felt selling the company to a private equity firm or strategic acquirer might make more sense.
From there, he thought about building not just an acquisition target, but a strong company in its own right. The result was that Karen HR needed to have consistent, high-value customers with good retention; brand-name logos wouldn’t hurt, either.
“I took the concept of embedding what the trajectory to acquisition would look like from a very early stage of the company and realized that the business strategy also had a very important part in dictating what those different types of exits with different types of partners could potentially be,” said Noel.
Along the path of building and growing Karen HR, Noel realized something: in effect, he was building a point solution. While Karen HR’s features helped with candidate engagement during the recruiting process, it was not a full ecosystem solution.
“We fit into two or three parts of the Talent Acquisition workflow,” said Noel. There were probably about another 12 components of that workflow that we didn't satisfy out of the gates.”
Unfortunately, his sales efforts showed that selling into big-name, high-value contracts would be incredibly difficult when you only had a point solution—most large enterprises either worked with consultants or outsourced the recruiting process entirely to fulfill talent needs. When enterprise leaders approached the Karen team, it was often out of curiosity about how the platform leveraged AI technology. Despite that interest, selling was difficult because large enterprises wanted a single ecosystem solution where someone else handled the details.
However, this opened up a huge growth opportunity for Noel, not just for the business in general but also for the possibility of an acquisition.
“If we wanted to actually get in and get a foothold into high-value organizations in North America, what we had to do was find strategic partners; and those strategic partners became targets for us for acquisition,” said Noel.
Building for symbiosis
After realizing that partnerships would be Karen HR’s path not only to growth but possibly an exit, Noel said he approached channel growth with “focused determination.”
The first thing he did was seek out the potential for “symbiotic” partnerships and realized both consulting firms and recruitment process outsourcers could work. As service providers, those organizations would invariably face technological disruption over time—partnering with a point solution like Karen HR could extend their value proposition without straying from their core operational model.
Noel’s channel growth approach worked and the company began to grow. Along the way, he got contacted by Alexander Mann Solutions (AMS) about a potential partnership. The two organizations would bring the other in on deals, helping both secure bigger contracts.
After some time, Noel realized he had two choices in front of him: he could either double down on symbiotic relationships with organizations like AMS or build a more agnostic channel partnerships structure that could scale in a more light-touch way in a bigger market.
Thinking back to his initial goal of seeking an exit and wanting to “consciously navigate in that direction,” he ultimately chose the doubling down route.
“As we began working with AMS further and further, it became natural,” said Noel. “The discussion around partnering in a deeper way began and then it progressed to ‘Would we be interested in discussing acquisition?’”
Throughout the course of their partnership, Noel said he also realized Karen HR and AMS had strong cultural alignment. From there, an acquisition started to make even more sense and ultimately, Noel decided to accept AMS’ offer to buy his company only two years after launching it.
Your end goal “will and should” affect business planning
After nearly four years at AMS, Noel is stepping down to start his new venture: an investment fund linked to music royalties called Craft Capital.
But as he builds this company, he plans to follow his own advice once again and begin with the end in mind. While he said this shouldn’t drive every decision, it’s something that founders always need to think about, particularly when faced with significant growth decisions.
“It's not by any means the be-all and end-all,” said Noel. “It’s not the functional North Star driver of your decision-making process, but it should be considered.”