1 How much experience do you have specific to my company and industry?
This goes for overall experience and experience in a specific field. The traditional investment banking field is littered with firms and individuals who will hawk anything at any time. And all at once.
2 How many transactions do you work on at once? (This is the most important question to ask when selling your business)
You don’t want a guy opening his trench coat with 50 different watches. It may be great for him, but whether the investment banker is in a $1B division or a one man shop it’s not a good thing for you if the banker has a lot of other things going on.
3 Are you going to conduct an auction?
Here is a little secret: Bankers often say they will run an auction when selling your business to get a higher price, but unless you are a Fortune 500 company, everyone hates auctions and it is more likely to backfire than succeed. Choices and options, yes, but an outright auction for private tech companies makes PE shops and buyers feel like commodities with nothing special to add.
4 Have you ever sold an early stage tech company before?
The truthful answer from most bankers is “no.” Why would they waste their time with small companies with great stories? And how would they ever figure out the best home, the best buyer? Most bankers are driven by the same financial thinking as financial buyers – what are the earnings? What are the metrics? So when it comes to tech companies for them? Fuhgeddaboudit.
5 How do you sell something for maximum value if there are no earnings (yet)?
Let’s say the banker candidate managed to answer #4. Now the question of how they are actually going to deal with selling your business pops up. And most likely you have a really special case where IP, patents and company potential are more important than past financials? Very hard for bankers to value.
RedFlash specializes in tech and early stage companies. We don’t come in as the outside banker but rather join management or the board as the internal corporate development team, working side by side with senior management to drive product growth and first accomplish success by positioning the company – before entering any M&A transactions. The result? Success. Take a look. A small tech company was burning $600k/month until RedFlash stepped in and helped grow and ultimately sell for $90mm cash.