Investment Banker Mark Clare: When & How to Exit

Skim the show notes from our chat with Mark Clare:

Capital Availability: New Zealand has sufficient capital for the right type of company, but many companies struggle to understand what VCs and private equity players seek. “We are not short of capital here in New Zealand. The biggest challenge is that a lot of companies don't actually understand what the VCs and private equity players are looking for."

Key Criteria for B2B SaaS: Investors look for a large total addressable market (preferably vertical), significant revenue scale, strong unit economics, and high growth rates. “If you've got a vertical, large market, you've got a level of revenue scale, and you've got the underlying unit economics, yes, you're compelling. But how big your revenue multiple is if you’ve earned the right to be valued on a revenue multiple basis will be driven by how fast you're growing. So if you're growing greater than 100% year on year, you're looking at that 8x to 10x plus ARR type number, but it drops off quite dramatically if you're only growing at 20%, or 25%, then you're far more likely to be down in that 1 to 4 times ARR range.”

Efficient Growth: Companies are now focusing on efficient growth and cash flow management, with an emphasis on reaching breakeven and demonstrating a path to profitability. “We're seeing a far greater focus on that, getting close to breakeven, that ability to show a path to profitability around it, compared to the days of people being very happy to fund losses and fund growth.”

Mastering competitive tension during negotiation: New Zealand companies often make the mistake of engaging in one-on-one negotiations with a single interested party instead of creating competitive tension by involving multiple potential buyers.