Entrepreneur Ziv Kedem has built multimillion-dollar businesses, and says founders need to know a thing or two before they think about selling their company.
Kedem is the chief executive and co-founder of Zerto, a tech business with 360 employees.
It operates in more than 50 countries and generating millions of dollars in revenue.
“It’s a very exciting story,” he told SmartCompany.
“It’s not something that I want to sell.”
Even though they could make a huge profit doing this, Kedem believes founders shouldn’t go into the game with the goal of a grand exit strategy.
Here are three things he thinks entrepreneurs should think about before making the decision to sell.
Focusing on the start, not the exit
“Don’t invest in going to market, only think about developing a product,” Kedem says.
One of Kedem’s earliest businesses was an IT company building complex storage systems for businesses wanting to minimise impact on production if something went wrong.
They called it Kashya and opened shop in 2000.
“This was never one of the sexier parts of technology,” he says.
He and his business partners were dealing with computer engineering and had an strong tech team whose entire focus was on building robust systems that could be integrated well into their customers’ organisations.
“At the time we were trying to figure out what we were trying to do, we were figuring out the algorithm,” he says.
They were a small team of friends with absolutely no money.
By dedicating their time and energy to how they could create exceptional technology, they grew Kashya’s turnover to $5 million and sold it off for $153 million in 2006.
But this never would have happened if they wanted to sell right from the outset.
“We were very strong on the tech side, we were not very strong on the go-to-market side,” he says.
Finding the best place for the business to grow
Before deciding to take that big payout and retire at 40, Kedem says founders should ask themselves a simple question: Where will the business have its best potential for growth?
Before signing off their business, owners should consider whether the other party is actually more talented and equipped to build the business to its fullest potential.
“If a company starts to flatten out, then it’s rough,” he says.
But he believes owners can use this as an opportunity to really optimise their problem solving skills and recreate the business instead of heading for the exit.
“You can either try again or try harder,” he says.
By dedicating efforts to building and shaping a business with its own growth in mind, founders are able to maintain ownership and work toward long-term sustainable outcomes instead of a quick-fix strategy, according to Kedem.
“In my opinion, we have much more fun doing that,” he says.
The best thing for you and investors
“If I receive an offer that’s just too big, out of responsibility to my investors, I will sell it [my company],” Kedem says.
The successful entrepreneur points to Facebook’s acquisition of What’s App.
“It’s well known that the What’s App team didn’t want to sell,” he says.
Like many startups and new tech companies, there is a culture and spirit that live within these businesses and letting go can be difficult.
But when an offer comes along that will give investors a return that is larger than life, Kedem says he has to act for the company’s key stakeholders.
“I have two types of investors: investors that invest in money and investors that invest in life,” he says.
Given his appreciation for the journey of starting up and building businesses, he always likes working with the latter.
That’s why he has really enjoying building his latest company Zerto.
They recently closed a $50 million capital raise, bringing total investment since launching in 2010 to $110 million.
“It was much more exciting than when we sold Kashya,” he says.
“Because it wasn’t just someone paying us a large sum to get the business that we built but rather someone investing to let us build a business that we care about.”