The panel discussion focused on creative exits for startups. The panelists discussed both traditional exits like strategic sales and mergers as well as non-traditional exits like private equity deals, management buyouts, and leveraged buyouts. They emphasized the importance of planning an exit strategy early and focusing on building value through developing disruptive technology, growing customer base and revenue. The panelists advised entrepreneurs to consider the motives and organizational fit of potential acquirers. They also stressed the importance of relationships, location of teams, and board composition for a successful exit.

1. Creative Exits:
Moderator: Fas Mosleh, SVP, IP M&A, Kanzatec
Panelists:
Mark Heyl, Partner, M&A, Hopkins & Carley
Tae Hea Nahm, Founding Partner, Storm Ventures
Yusuf Safdari, Partner, Pilsbury
Muddu Sudhakar, VP/GM, VMWare
Rights to trademarks referenced
herein, other than Kanzatec
trademarks, belong to their
respective owners. We disclaim
proprietary interest in the marks
and names of others.
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2. CreatiVe !?
What does creative mean?
Unusual
Solving an issue creatively
Unconventional
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3. Creative Exits - Objective
• We explore the many ways that you can get some kind of valuable
payout before you move on to your next project. We will discuss
several interesting ways of ensuring that you and your investors can
walk away with something in your pockets. When is the best time to
plan out an exit strategy? We examine exits contemplated in the early
stages through the later stages.
• We will talk about what constitutes the most value in your company,
such as the people, intellectual knowledge, relationships or the
network. i.e. where are the value drivers, when an acquirer looks at
you? Is it the alliances, customers, or intellectual property such as the
patents? Or is it the technologies, the products the channels and the
management team as well as the operational processes that make
your company successful?
• But what are the non-conventional ways to get out of here and still
get a great payback?!
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4. Agenda
•
•
•
•
Introduction
Panelist views
Prepared questions
Open session
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5. My Background - Fas Mosleh
– Global High Tech GM/Sales/Marketing/BD executive
• Spanned chip to software
– IP Monetization executive at Kanzatec IP Group (sell ‘000’s
patents/year)
• 100+ buy/sell transactions over $200M
• VP Global Acquisitions – Intellectual Ventures
• Executive Director Patent Sales Group – HP
– Manager, founder HP’s 1st Venture fund in 1998 ($2B+ M&A)
Experienced at building new businesses - Executive at venture funded
startups - Agiliti, Vernier Networks, Jamcracker
Executive at Hewlett-Packard, Eastman Kodak, Agilent, Avago
Technologies and Micron; IBM UK labs & sales management

6. Exits where I worked
EXIT POTENTIAL
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7. Why do Companies Acquire?
Typical drivers
Ask “How do we provide the value?”
Size
Products
Technology/IP/Trade secrets
Team
Customers
Channels/Distribution
Processes
Partners
Brand
Patents
Share
Entry
New products
Change
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8. The Value in a Tech Company
Products &
Technology
Management
Processes &
Operations
Patents
Customers and
Channels
Team & Brand
© Copyright Kanzatec LLC 2013
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9. The Value in a Tech Company
Products &
Technology
Management
Processes &
Operations
Patents
Customers and
Channels
Team & Brand
© Copyright Kanzatec LLC 2013
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10. IP ‘Exit’ Examples
Assets
Acquirer
Price paid
Company
17000+
Google
$12.5B
Patents
6000
Rock Star Bid Co: RIM,
Apple, EMC, Ericsson,
Microsoft, Sony
$4.5B
Patents
100’s
CPTN Holdings (consortium $450M
including Microsoft, Oracle,
Apple, EMC)
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11. IP Sale Examples
Assets
Acquirer
Price paid
Patents
1700
Intel
$375M
Patents
1100
Intellectual Ventures, RPX
$525M
Patents
800
Microsoft
$1B
It is not the strongest of the species that survive, nor the most intelligent, but the one
most responsive to change. – Charles Darwin
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12. Elements of Value - What
Exit Potential (Perceived Value)
P-Patents/IP
T-Team
C-Customers/channel
PT-Product/Technology
W-Whole business
© Copyright Kanzatec LLC 2013
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13. High Exit Potential Examples
Many exit options
SKYPE
Salesforce.com
Twitter
GoDaddy
‘Local’ Class
Business
‘World’ Class
Business
Kodak
© Copyright Kanzatec LLC 2013
Few options
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14. 3 Developmental Phases = Rings of EP - How
Rising EP
Example conditions
C1
B1
Working product
Proven value proposition
Differentiated
Working technology
Filed IP/Patents
Solid market traction
Proven customer wins
Proven business model
Acclaimed technology
Granted IP/Patents
A1
Proven MMM – profitable
Market leader (share)
Strong Brand
Notable solution fills gaps
Consistent results
Proven people
© Copyright Kanzatec LLC 2013
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15. Exit on top - When
Your Exit potential (value)
Top of the world
Preferred
Exit
Getting better
Missed it 
We can sell
Exit Potential ‘S’ Curve
GAP
© Copyright Kanzatec LLC 2013
Time
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16. Key Questions to Ask Yourself
Prioritize key value drivers
Market Money Machine
Timing is Key
Know where you are headed
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17. 17

18. Mark Heyl
Creative
Exits
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19. Creative Exits:
Traditional vs. Non-Traditional Transactions
Presented
by
Mark A. Heyl
Hopkins & Carley, A Law Corporation

20. Traditional Exits
• Strategic Sale to Third Party
– Asset Sale
– Stock Sale
– Merger
• True Merger
• Reverse Triangular Merger / Forward Triangular Merger
• Selling to Employees
• Transferring to Family Members
• Liquidation

21. Traditional Exits
• Strategic Sale to Third Party
• Selling to Employees
– Source of Payment
– Remedies for Non-Payment
– Condition of Business
– Condition of Customer Relationships
• Transferring to Family Members
• Liquidation

22. Traditional Exits
• Strategic Sale to Third Party
• Selling to Employees
• Transferring to Family Members
– Source of Payment
– Estate Planning
– Ability to “Let Go”
• Liquidation

23. Traditional Exits
•
•
•
•
Strategic Sale to Third Party
Selling to Employees
Transferring to Family Members
Liquidation
–
–
–
Voluntary Dissolution / Termination
Bankruptcy
Assignment for the Benefit of Creditors

24. Non-Traditional Exits
• Private Equity
• Management Buy-Out
• Leveraged Buy-Out
• ESOP

25. Thank you.
Mark A. Heyl
mheyl@hopkinscarley.com
Hopkins & Carley, A Law Corporation
70 S. First Street
San Jose, CA 95113
200 Page Mill Road, Suite 200
Palo Alto, CA 94306
(408) 286-9800
hopkinscarley.com

26. Tae Hea Nahm
Creative
Exits
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27. Tae Hea Nahm @ Storm Ventures
Mobile
SaaS
Incubation
US IPO
Sold to Adobe Storm LP
Sold to Cisco
Korea
Sold to Qualcomm
Storm LP
Sold to CoreLogic
Korea IPO
Current
Boards
Sold to IBM
Sold to Avocent
Sold to Cisco
Semi
Taiwan IPO
Sold to SemTech

28. Exits
M/A
IPOs
Sold to Cisco
US
Sold to Qualcomm
Sold to IBM
Sold to Adobe
Sold to SemTech
Korea
Taiwan
US IPO
Sold to Avocent
Sold to CoreLogic
Korea IPO
Taiwan IPO

29. Yusuf Safdari
Creative
Exits
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30. OPEN: Creative Exits for
Startups
Presented by
Yusuf Safdari
October 21, 2013

31. Buyer Reasons for Engaging in M&A
•
•
•
•
•
•
•
Buy (rather than build) innovative technology products and services– “Buy me
Microsoft, Oracle or Cisco!”
Acquire a highly talented group of technologists and tech execs-- (“Buy me Google,
Facebook or Twitter!”)
Obtain financially valuable or strategic IP rights (Acquisition of Motorola by Google
for mobile patent portfolio).
Realize operational (economies of scale) or financial synergies (Merger of HP and
Compaq).
Gain access to new markets or product lines to drive sales and financial
performance of acquiror’s existing products (Oracle acquisition of Sun).
Replace inefficient management (Somebody should have bought Yahoo!).
Purchase a Seller that is undervalued by market or distressed but with value.
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32. Yusuf’s Top 5 Points to Keep in Mind
• Plan the exit when you form the Company: who will want to buy it,
why and when? You should be an acquisition target for multiple
companies to optimize your exit.
• Keep your corporate house in order. Clear contracts in line with
market norms and capital structure to avoid scuttling a deal.
• Acquirors are often found during strategic or investment
discussions. “What would you guys think if we bought you
instead?”
• Build defenses around the “crown jewels,” e.g., assignment of IP,
patentable innovations, market barriers and a committed team.
• Keep on top of developments in your market and adjacent
markets—be ready to pivot towards market opportunities and
acquirors.
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33. Overview of M&A Process
I.
Initial Business Discussions – discuss desirability of transaction and principal
business terms.
II. Letter of Intent – prepare and negotiate basic terms of a transaction in a
generally non-binding form.
III. Due Diligence – investigation of the assets, qualities, finances and liabilities of a
business.
IV. Negotiation of Acquisition Agreements – draft and negotiate detailed deal
terms.
V. Preparation for Closing – hold shareholder meeting to approve transaction,
satisfy closing conditions, obtain third party consents, obtain government
approvals, etc.
VI. Closing – complete and sign definitive documentation; all closing conditions
must be satisfied or waived.
VII. Post-Closing Obligations – adjust purchase price; indemnification for
misrepresentations.
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34. Muddu Sudhakar
Creative
Exits
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35. Creative Exits for Startups
Muddu Sudhakar
Cloud Services, Big Data, Storage
VP & GM VMware
@smuddu

36. Advice for Entrepreneurs
• Do not plan or think about Exit
• Focus on building great company
• Constantly work towards creating value
• “Build it and they will come” is not a bad
mantra

37. Focus on Building Great Company
• Build great teams
• Good market opportunity
• Develop Disruptive Technology
• Continuous work with customers
• Grow Revenue

38. Advice for Entrepreneurs
• Companies are bought, not sold
• Companies bought get 2x to 5x better price vs
companies sold
• Do not hire Investment Bankers unless it is
MUST

39. Exit Expectations
• Most founders and entrepreneurs have
unrealistic expectations of exit values
• Most VCs do not have good sense of exit
values either
• ALL VCs want Home Runs for ALL companies

40. Exit Values
• 2009/2010: Median VC exist value was $70M
• 2011/2012: Median VC exist value was $100M
• The Average Successful Startup Raises $25M+
and get acquired for $196M

41. 2012 VC Exits
• More than 50% of the startup exits were less than $50
million, while over 80% were less than $200 million.
Only eight $1 billion startups were acquired in 2012.

42. Valuation for VC Investments
• Entry price matters for getting good returns for VCs
• Entrepreneurs need to always think about improving
and increasing valuation
• To get good valuation focus on building great teams,
disruptive and unique technology, grow customer base,
and grow revenue
• Stay Lean to keep options Open

43. Angel vs Seed funds vs VC
• Very important to engage with top-tier and
good angels, firms, funds
• Lot of bottom feeders – be careful
• Wrong person can destroy company and
creates challenges w/ captable – impacts exits
• In M&A and going IPO having right VC on the
board makes a big difference

44. Board Structures
• Important to have independent people on
board
• Represent fiduciary of common shareholders
• Ensures right steps are taken to protect
company and people

45. Relationships
• Build relationships and network with partners, OEMs,
potential acquirers
• Start Early
• Go deep and broad
• Prioritize
• Some VCs and board will tell you otherwise – they are
wrong

46. Motives of Buyer
• Understand motives of buyer for acquisition
•
•
•
•
•
Next $1B revenue business unit opportunity
Lack of revenue growth
Missing next-generation Product
Talent acquisition
Strategic purchase

47. Organization Mapping and Dynamics
•
•
•
•
Understand buyer organization and Dynamics
Who are all key decision makers
Where do they plan to fit the acquisition?
New Business Unit, new product group,
integrate into existing teams
• Plan to retain and grow both R&D and/or sales
team?

48. Talent and Teams
• Location of team is VERY important
• Understand your buyers R&D group locations
• Product and talent acquisitions require teams to be local
• Remote teams and outsourcing often hurt in acquisition
• Important to have good cultural fit with R&D teams
• VCs /Management hate to admit that location of team matters

49. Prepared Questions and Open Q&A
Creative
Exits
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50. Questions
• What is the most creative exit deal you ever put together – either
on the sell side or on the buy side? Why? What and How?
• What do you think a company or its founders should consider when
planning an exit?
• When should you think about an exit and why?
• What is the best time to do an exit? Please give an example of good
timing and bad timing
• What is your best way (What are the ways) to initiate an exit?
• How do you price your company (creatively) for an exit?
• What is different about PE deals
• When did you start planning for an exit?
• How did you decide what was offered was the right amount?
• Outline the creative moves you had to make to execute an exit
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51. What’s Your V?
VALUE
Customers
Employees
Shareholders
Investors
V
V
© Copyright Kanzatec LLC 2013
V
V
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52. Thank You
Creative
Exits
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