Sig Mosley, managing partner of Mosley Ventures, is widely regarded as “The Godfather of Angel Investing.”
Since 1990, Mosley has invested in more than 120 startups with 82 liquidity events, and is the record holder of the largest Southeast Venture deal with the $5.7 Billion acquisition of Tradex by Ariba.
To position a company for a transaction ahead of a sale, Mosley says it's important to begin early, in part because you never know what you're going to find.
"You need to know what is going to be uncovered because it can have a significant impact," Mosley said during the Atlanta Smart Business Dealmakers Conference.
And when working with early-stage technology companies, he says it's important to figure out what the entrepreneur wants because often the entrepreneur is near burnout. When that's the case, there's more of an urgency to get a transaction completed. Make sure, then, that the entrepreneur has bought into the idea and the early work has begun.
It's also prudent to employ an investment banker to help with a process.
"Because while you may think and the company may think they know who the acquirers are, that's not always the case," Mosley says. "I have had number of cases where, ultimately, the acquirers were bought in by the investment banker, and also were deal so gotten much better structured because of the investment banker."
He says in one deal in which he was involved, the entrepreneur thought he had things tied down. But once the investment banker came, issues were discovered, and the timeline was extended.
"So, begin early," he says. "Look under all the rocks and make sure you know what you have under there. But at the same time, we as investors need to know what the entrepreneur wants and how he wants to do it, and to be able to help him."
When it comes to choosing a buyer type, Mosley says part of it depends on why you are selling and what you are selling. In some cases, a PE firm comes in and will pay a good price to get the company. But that can create come concern regarding what happens post-sale to the employees and customers, something that's important to most entrepreneurs.
It's important, then, for the seller to determine what they're trying to accomplish and who's at the table, in part because there's not always a lot of time to make decisions.
In addition to an investment banker, Mosley recommends that the company and the CEO have a very good corporate attorney, somebody that they are reasonably close to, and are comfortable with talking to about the options and about what's on the table.
"Because remember, your investment banker is getting paid, so he wants a deal done," Mosley says. "Your attorney? Yeah, he's going to bill you by the hour but he will also tend to probably give you more unbiased advice."
