FINTECH SECTOR

EXIT STRATEGY

  • Initial public offering means 'first sale of stock' and it fundamentally implies that an organization begins coasting on a financial exchange, selling countless their offers in the process to institutional and non-institutional speculators.

  • These huge organizations are that VCs dream of, as they frequently give enormous totals of cash-flow to all parts included (authors, early representatives and financial specialists).

  • For quite a while the NASDAQ and Wall Street have been the primary business sectors for European new companies looking to IPO.

  • Nonetheless, lately organizations, for example, eDreamsOdigeo, Zalando, or Rocket Internet have picked the Madrid, Frankfurt or London stock trades to open up to the world.

  • As per Tech.eu, in the initial a half year of 2014 there were 11 IPOs in Europe.

  • An intrigued pattern with regards to the startup world with regards to opening up to the world is that an ever increasing number of organizations are taking more time to IPO.

  • This is an outcome of the high measure of capital accessible in the startup market from Venture Capitalists, private value firms and other speculation organizations.

  • Similarly that only one out of every odd startup needs to fund-raise from VCs and business blessed messengers (bootstrapping is a reasonable other option), few out of every odd startup needs to offer itself to a greater organization to give a re-visitation of authors, representatives and speculators. Organizations that can build up a strong plan of action and scale may decide to remain autonomous and reinvest the benefits in the organization.

  • Some portion of those benefits can likewise be appropriated among speculators as a profit, giving liquidity to outside accomplices while staying away from the public business sectors and the commitments that accompany it. "

  • This is one of the most widely recognized inquiries that new businesses or beginning phase organizations are asked, however numerous business people have not really thought about their leave procedure.

  • A "leave system" doesn't allude such a great amount to your takeoff from the organization (in spite of the fact that it may), yet rather how a speculator will make a profit for his/her/its venture.

  • In spite of the fact that it might appear to be unreasonable, thinking about to your leave technique in advance can assist you with deciding how to structure and work your organization, and numerous speculators will need to know your optimal leave system before they contribute.

  • Remember that these different procedures are additionally not totally unrelated, and your organization may encounter at least one of these through its lifetime. •Cash Cow.

  • The simplest answer for what is your exit strategy would be “None!” However, many investors will want to move on and get a return on their investment, and a significant pay day is difficult if there is no opportunity for them to sell their equity.

  • Many serial entrepreneurs would also prefer to exit and move on to new projects rather than stay with the same company long term. •M&A – aka Mergers & Acquisitions. For a startup, this means the sale of all or a part of your company (either the assets or the equity) to another person or entity.

  • To address a common misconception, an M&A transaction for the equity of a company is not the same as issuing equity as part of a financing round.

  • In a financing round, an investor typically acquires equity directly from the company, and all your existing equity holders continue to be equity holders.

  • Conversely, M&A is a sale of already issued and outstanding equity from a current equity holder to a third party.

  • That current equity holder sells its shares, and that equity holder will receive cash (or other compensation) in exchange for those shares.

  • That liquidation of the investment, which will hopefully include the initial amount invested plus some return, is considered its “exit.” •IPO – Initial Public Offering. During the ‘Dotcom bubble’ of the late 1990s and early 2000s, startups were rushing to the IPO finish line, emboldened by the seemingly unlimited promise of a new market: online sales.

  • After the bubble burst, startups focused on more modest and sustainable growth.

  • That mentality of an IPO as the ultimate goal has tempered some companies, but it is still a common exit strategy when a company gets to be quite valuable.

  • Facebook, Twitter, and Snapchat have all “gone public”, and other famous startups like Airbnb are rumored to be scheduling their IPOs in 2017.

  • Although this is not a short term plan, it is still the ultimate goal for many startups.

  • Examples of Exit Plans

  • 1.In the years before exiting your company, increase your personal salary and pay bonuses to yourself. However, make sure you are able to meet obligations.

  • This is the easiest business exit plan to execute.

  • 2.Upon retiring, sell all your shares to existing partners.

  • You will get money from the sale of shares and be able to leave the company.

  • 3.Liquidate all your assets at market value. Use the revenue to pay off obligations and keep the rest.

  • 4.Go through an initial public offering (IPO).

  • 5.Merge with another business or be acquired.

  • 6.Sell the company outright.

  • 7.Pass on the business to a family member.

  • 8.The fintech market is experiencing a shake-up, an evolution and a refining, and as startups fall away, others are being snapped up or incubated by big banks.

  • “Consolidation has been a repetitive pattern in other digitally disrupted sectors and the time for this to happen in finance is on its way,” says Nathalie Oestmann, chief operating officer at Curve.

  • 9.What we may be reaching is peak money for the many, which could soon be funnelled into the few.

  • “Right now, we need more scaled fintechs, rather than miniature startups.

  • Once the maturity of the fintech market improves, there’ll be space for new players again to build on existing propositions,” says Anton Ruddenklau, head of digital and innovation for financial services at KPMG.

 
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