When then an acquirer and an entrepreneur can’t agree on a price, someone always comes up with the idea of bridging the difference with an earnout. Today in the Startup Solution I'm demystifying those earnouts -- how they work, what to include in yours if you negotiate one, and how often they actually pay out (spoiler alert, much less than you’d like to believe) https://lnkd.in/gXpcnsEF
In my experience some key to a successful earnout is to plan for it in advance and that the sell side retains full control of all aspects of the business while the earnout is executed. And if the buyer wants to have any changes made while it is in progress that immediately triggers 100%.
Highly recommend this podcast, especially on the topic of earnouts. It's easy to count this money as soon as it appears on a term sheet. But in reality ... just listen to Heidi :)
Insightful
Thanks for sharing, Heidi! Always great to have your clear, simple explanations of complex topics, from both practical and mental/emotional standpoints.
Great listen!!
Great message Heidi!
Wow Heidi Roizen
Heidi Roizen - excellent lesson. In my limited experience, both sides feel bad, as acquiror never wants to pay (“we already paid enough”) and acq’d startup thinks it was undervalued. Litigation is a common outcome, so subtract 30%, and the value of your life, and family’s life, sucking for months.