Start Up Exits
Navigating Startup Exits: What Founders Need to Know Before IPO, Acquisition, or Saying “I’m Out”
By Ron Gula, Gula Tech Adventures
In this week’s VC 101 episode, I explored one of the most critical and often misunderstood aspects of building a startup: the exit. Whether it’s an acquisition, a merger, or the elusive IPO, how you leave your company matters. Not just for your investors, but for you, your team, your mission, and the innovation legacy you leave behind.
Having been on both sides of the table—founding companies like Tenable Network Security and investing through Gula Tech Adventures—I’ve seen exits go incredibly well, and others… not so much. Recently, two of our portfolio companies, Boldend and Polarity, had successful exits. Their journeys sparked this in-depth breakdown of how to prepare for, evaluate, and execute a smart and strategic exit.
Define Your Goal First
Before talking numbers, stock terms, or strategy, ask yourself: What does success look like for you? This is Slide Five of our Five Slide Pitch Deck—your North Star. Maybe you want to scale to IPO. Maybe you want to protect critical infrastructure through wide adoption of your technology. Maybe you’re hoping to sell to a strategic partner and build from within.
Whatever your definition of success, you won’t recognize the right exit if you haven’t defined it. Too many founders end up on a path shaped by someone else’s expectations or market pressure, only to discover too late that they never aimed for what they truly wanted.
Understand Deal Structures
Acquisitions typically come in one of two flavors:
Cash Deals: The acquiring company writes a check to shareholders. Simple on paper, but often layered with complexities like earn-outs, escrow, and non-compete agreements.
Stock Deals: Instead of cash, you get shares in the acquiring company. This can be lucrative—if that company performs. But it also introduces risk and a lack of control over future value.
Then there are hybrid deals, retention bonuses, carve-outs for employees, and countless other structures that can complicate things. As a founder, especially if you haven’t exited before, these nuances can either protect your upside or cost you dearly.
Aligning Incentives
Founders, investors, employees—everyone has different motivations. A deal that’s life-changing for you might fall short of your investor’s expected return. Or vice versa. For example, a seed investor might be thrilled with a 10x return. But a Series B firm that came in six months ago may feel short-changed.
You have to navigate those perspectives thoughtfully. Transparency, honest communication, and clarity about stakeholder goals go a long way.
Your Role After the Exit
Exits don’t always mean you ride off into the sunset. Often, they mean you get a new job—at the acquiring company. This can be a blessing or a burden depending on the deal terms and your goals.
Are you stepping into a leadership role at a larger organization? Do you still get to build? Is your title “VP of Product Integration”—but in reality, you’re sidelined from innovation?
The first company Cyndi and I sold, Network Security Wizards, landed me a VP title at the acquirer. I got to run my own group and continue innovating. But not every deal works that way.
You’ll also need to consider how the deal affects your salary, vesting schedules, and your team’s morale. For many startups, post-acquisition retention packages can make up a sizable chunk of the total value received by founders and early employees.
Do Financial Planning Now, Not Later
If you’re a founder, especially a first-time founder, you likely own stock. But how that stock is structured—and how you handle taxes—can have a huge impact on what you walk away with.
Tools like Qualified Small Business Stock (QSBS) exist to reduce your tax burden, but they must be set up well in advance. Too many founders get so busy building that they forget to plan their exit smartly. Don’t wait until you’re negotiating term sheets—talk to a financial advisor early.
The Players in the Exit Game
When a company exits, it’s not just about the founder and the buyer. There’s a whole ecosystem involved:
Strategic Buyers: Big tech firms like Cisco, Palo Alto, and Tenable often buy startups to acquire innovation faster than they can build it.
Private Equity Firms: These buyers care more about profitability than growth, and often prefer cash-generating businesses.
Bankers and Brokers: Just like real estate agents, they connect buyers and sellers. They’re crucial during dual-track processes (raising money while seeking acquisition).
Public Markets: IPO is an option for very few—only about 3% of startups ever get there—but the valuation potential can be massive.
Venture Capitalists: Your existing investors often have deep relationships with potential acquirers—and their own views on when to sell.
The Five Big Questions Founders Must Ask
Should we run a market check?
Founders often hire a banker to test the waters—should we raise more capital or entertain acquisition? While it can be helpful, it’s often a red flag if it comes from desperation or founder burnout. Be clear about your motives.Is this the right time to sell?
This ties back to your goals. If selling now gets you closer to your mission—quicker impact, better reach, or solving a critical problem—go for it. Otherwise, be cautious about short-term rewards.What’s my company worth?
Valuation is often a multiple of Annual Recurring Revenue (ARR). For cybersecurity companies, that can range from 4x to 26x depending on growth, margin, and buyer type. Remember: high profitability attracts private equity. High growth attracts public market attention.Am I building a feature or a company?
Features get acquired. Companies endure. If you can scale, hire, support, and market your solution—you're building a company. Otherwise, a strategic exit may be the better move.What’s next for me?
After you sell, what will you do? Start another company? Join the acquirer? Become an investor or public sector leader? Don’t leave this answer to chance. Your next move is part of your legacy—and your learning curve.
Founders, Your Exit Is More Than a Number
Too often, founders chase exits like a finish line. But your exit is the beginning of the next chapter—your future reputation, career, and impact depend on how you handle it. Think beyond the dollar amount.
When we sold Network Security Wizards, Cindy and I used that experience to build Tenable. Now through Gula Tech Adventures, we’re investing in the next generation of cybersecurity innovation—and helping founders navigate their own exits with eyes wide open.
We need smart, motivated, experienced entrepreneurs to keep innovating. If you're building in cyber and looking for funding or advice, check out our portfolio or reach out via LinkedIn or investor@gula.tech.