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When The Price is Right: The Art of Timing Your Exit

Bob Barker, the long-running host of the game show “The Price is Right,” died last month. Barker was renowned for games where contestants had to choose between a good prize, like a new washing machine, or the chance at a fabulous prize, such as a new car. The catch was, that if you gambled for the new car and lost, you ended up with nothing.

In a way, The Price is Right serves as a fitting analogy for building a business with the intent to sell. Along the journey, you will be faced with the decision between accepting a good exit opportunity now or holding out for the possibility of a bigger exit later on.

For instance, this week we released a compelling interview with a woman who took significant risks to build a business valued at over $100 million.

Over the years, we’ve interviewed numerous founders who have sold their businesses for life-changing sums. However, few stories are as striking as that of Sarah Dusek. To provide some context, Sarah and her husband faced a business failure during the 2008 financial crisis. Consequently, they were in financial straits when they founded what would become Under Canvass. This venture offered tented hotels, or “glamping,” near National Parks across the US. To kickstart their dream, they borrowed $40,000 from family members to manufacture their first tent.

Although they successfully got the business off the ground, it was cash-hungry. To fuel their dream, the Duseks began juggling introductory rate offers on personal credit cards.

The first substantial capital they raised was through venture debt. A satisfied customer lent them money in exchange for warrants on 4% of the company.

Under Canvass flourished, and after five years, they had four locations with an impressive $3 million of EBITDA.

Now, put yourself in the Duseks’ shoes. Imagine recovering from a business setback that financially drained you, scrapping together capital to launch a new venture by leveraging personal credit cards and relying on family loans. Then, reaching a point where your business is generating $3 million of EBITDA. What would you do? Sell it? Or perhaps, let it run on cruise control and pocket the dividends?

The Duseks chose neither of these options.

They decided to go big, securing a $16 million round of investment, primarily composed of mezzanine debt at a 13% interest rate. In return, the Duseks pledged their shares in Under Canvass as collateral and even signed a personal guarantee, thereby risking financial ruin for the second time.

Listen to Sarah’s rationale for risking it all, in this video.

It poses the question: What would you have done in their place?

As a founder, consider your “Freedom Point” — the juncture at which selling your business would provide you with sufficient liquid wealth to sustain your desired lifestyle indefinitely. A rapidly growing business boasting $3 million of EBITDA would have likely been worth at least $15 million. Would that be enough for you to cash out? Or would you, like the Duseks, gamble everything for the chance to gain even more?

This query is deeply personal, but it’s worth pondering. At which moment will selling your business give you the freedom you’re working for? When you get there, will you have the discipline to sell or will you risk it all for a chance at even more?

Listen to Sarah’s Episode

📣 Quote of the Week

“All our eggs are in one basket and we’ve lived on a knife edge now for almost a decade of plowing everything we’ve got and everything we are in this business. So, it would be good to take some chips off the table.”

–  Sarah sharing why she (finally!) chose to sell a majority stake in Under Canvass.

🏆 A Revenge Trophy 

Fuelled by a harrowing ordeal with a venture capital firm while fundraising for Under Canvass, Sarah leveraged the capital she received from selling her business to launch her own venture capital fund. Listen to Sarah describe the harrowing deal that led her to start Enigma at the 1:07:50 mark of the podcast.

📈 Recent Deals

  • Infinite ID, a U.S.-based digital identity authentication solutions company, has been acquired by First Advantage Corporation for $41 million in an all-cash deal. The transaction was funded with cash from First Advantage’s balance sheet and aims to expand its identity solutions portfolio in the United States. Infinite ID is profitable and is anticipated to generate annual revenues exceeding $10 million.
  • Sealing Technologies, Inc., a Maryland-based cyber and technology company, has been acquired by Parsons Corporation for up to $200 million. The initial cash payment is $175 million, with a potential $25 million earn-out in Q1 2025 if specific 2024 revenue targets are met. Accounting for a $21 million tax benefit related to the transaction, the base purchase price represents a 10x multiple on SealingTech’s projected 2023 adjusted EBITDA.
  • Yieldbroker, an Australian trading platform, will be acquired by Tradeweb Markets Inc. for A$125 million in an all-cash deal. Yieldbroker handles approximately A$6 trillion in annual trades, focusing on government bonds and interest rate derivatives in Australia and New Zealand. The acquisition is expected to close later this year, pending regulatory approvals.

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