You can’t start a business these days without planning your way out.
For early-stage entrepreneurs, thinking about a potential exit from the business starts before the company is even launched.
“Many of the companies we work with are looking to be sold,” says Cathy Belk, president at JumpStart Inc. “There are entrepreneurs who want to grow the business and ultimately achieve an exit, which is what creates wealth for the entrepreneur and others on the team and allows the team to continue to rock it in terms of its growth path.”
Since 2004, JumpStart and its partners have engaged more than 10,000 tech companies through the Northeast Ohio Startup Network, and helped participating companies raise more than $2 billion in capital, generate more than $2 billion in revenue and create more than 10,000 jobs.
We caught up with Belk to talk about JumpStart’s role in building a stronger ecosystem in Cleveland to help early-stage companies — and their founders — maximize their potential.
Plan your exit
Mr Beams is a prime example of what Belk seeks for all startups that come through JumpStart.
David Levine and Michael Recker developed Mr Beams as the signature brand for Wireless Environment, which launched in 2006. The startup grew to $24 million in revenue by 2016. A year later, the company was bought by California-based Ring. Last year, Ring was bought by Amazon for more than $1 billion.
Levine told Dealmakers in January that work on a potential sale got underway during the earliest stages of the business.
“Because of the growth of private equity and all the money following private equity, it’s a unique opportunity in our country’s history to build a business to the point you’re capable of and then pursue exit opportunities,” Levine says.
“You’re building the organization to ramp up more quickly, meet criteria that are important to private equity firms and then have everything clean enough to exit.”
Belk takes great pride in what Levine has accomplished and aims to help others replicate his success.
“Dealmaking is really critical to young firms being able to grow,” Belk says. “They need to find partners who want to invest capital into their businesses. They need to be able to find customers and have contracts with customers that will enable them to sell their products and generate revenue. The process to put those deals together is a critical part of the work we’re doing with the entrepreneurs.”
Validate your market
One key step that unproven companies often overlook in their growth strategy is market validation.
“Somebody has to be interested enough in your product to pay for it,” Belk says. “It’s not very intuitive for lots of entrepreneurs to do that step first, but it is a really important step to do before there has been a lot of time spent building a product, designing its features or looking at what it’s going to deliver.”
As you’re building a business, you should talk to hundreds of potential customers to get customer feedback very early in the process, she says.
Access to capital also must be addressed.
“Many startups and small businesses could grow more quickly if they had access to capital,” Belk says. “We are constantly scanning the marketplace to understand — based on what’s going on with the economy or what’s going on with investors in the area — where there is a need for different stages of capital or different structures of capital.”
Build your network
Two key elements to becoming effective dealmakers are network building and fluency in the language of dealmaking. The education on these topics isn’t just for the ones building the business, however.
“We also think it’s important for us as somebody who is investing in very early-stage businesses to have great counsel on our side as well,” Belk says. “The more expertise there is in the ecosystem, the better everybody is going to do in having deals that are completed with outcomes that everybody wants.”
It’s never too early to bring outside expertise into the conversations you’re having with your team about growing your business.
“One of the benefits of having a strong ecosystem or a strong network of partners is that no matter where an entrepreneur is, there are people and organizations who can meet them where they are and help them with the decisions they need to make and the work they need to do to grow their business to the next step,” Belk says. “There is nobody who wouldn’t be helped if they come to us or one of our partners. We will support them.”
Core City: Cleveland is a program JumpStart created that offers free one-on-one business advising sessions to any entrepreneur or small business owner who lives or owns a business in the city of Cleveland.
“Everybody who lives here has an opportunity to make their entrepreneurial dream come true and has connections to whatever they need to make that happen,” Belk says. “It’s exciting that there are so many people interested in starting and growing a business.