Setting realistic expectations 📄

Welcome back to another edition of The Wise Exit!

In today’s newsletter: 

• 3 lessons from Shelli Pavone about setting realistic expectations, having a tidy cap table, and paving the way to an acquisition with strategic partnerships. 📄

• A brand new episode of the Cashing Out podcast 🎧

• Our round-up of interesting M&A transactions from the past week 💰

Let’s dive in!

For over 20 years, Shelli Pavone has been making a name for herself in the healthcare industry. She worked for pharmaceutical and device startup Lumere and then led the sales and marketing team at Avant-garde Health before launching her own company.

She’s now the President of Inlightened, which she co-founded with Michelle Higginson. Inlightened is a platform that connects entrepreneurs with highly-specialized clinicians who want to shape the future of their field. It lessens the administrative burden so big thinkers can focus on their innovations.

Inlightened was acquired by LocumTenens.com, part of the Jackson Healthcare® family of companies this August. We’re going to share with you 3 important lessons that Pavone learned from the acquisition. 

M&A Lesson 1: Set realistic expectations when it comes to Crowdfunding 

A funding option that Pavone pursued prior to the acquisition process was crowdfunding. In addition to injecting the business with growth capital, she thought that her crowdfunding partner would enable a simplified cap table to get the funds flowing. 

The experience ended up being mountains of regulatory and legal paperwork and a rollercoaster of unexpected hurdles. On top of that, the fundraising platform promised that they had a huge network of investors ready to part with their cash. In the end, Pavone’s own network funded 91% of her campaign!  

When considering crowdfunding options:

• Work with your crowdfunding provider to set and align realistic expectations prior 

• Be prepared for the challenges of regulatory and legal paperwork involved in crowdfunding

• Acknowledge that things might not go as planned, to prepare yourself for the inevitable hurdles

M&A Lesson 2: Understand and organize your cap table before diving into M&A  

Understanding your cap table before you begin the M&A process is worthwhile. One of the things that made crowdfunding so attractive was a simplified ownership structure. Pavone dreamed of a simple cap table, "as neat as a meticulously curated bookshelf." And she was right: making sure it's organized and clear is key to preparing your company for an acquisition. Unfortunately, what was understood in theory was not at all her experience when it came time to sell the business.

Pavone had thought that the agreement she signed with her crowdfunding partner meant they would act on behalf of the investors as a single point of contact. At the last minute, she was told that this wasn't the case. Her team had to then frantically hunt down signatures from each investor, who were across continents and time zones. 

Disorganized cap tables can lead to delays once the M&A process gets started. Keeping it up to date, ensuring you fully understand the investor approval process for selling the business, and giving yourself enough time to accomplish the requirements are key. 

Whether you’re crowdfunding, have raised money through Venture Capital, or through family and friends, organization and preparation will make the due diligence process smoother and give potential buyers peace of mind that ownership will be accurately reflected after the acquisition.  

M&A Lesson 3: Pave the way with strategic partnerships 

Pavone wasn’t looking for an acquisition when she first met with the president of LocumTenens.com in 2022. In fact, they mostly talked about the clinician perspective in contributing to innovation in the healthcare industry.

But as the conversations continued, she could see how LocumTenens.com’s network of clinicians would integrate well with her own, allowing for a much larger pool of vetted professionals. 

They soon started talking about an acquisition where Inlightened would continue to operate independently, with existing leadership. These conversations paved the way for an unexpected outcome, helping Pavone realize her dream more quickly.    

• Takeaway: Take the time to develop strategic partnerships that provide you with a clearer idea of what you want and pave the way for new opportunities.   

Cashing Out: How A Venture Capital Firm Can Influence Your Decision To Sell 

Jean Anne Booth has over 30 years of experience in high tech ventures. She has had a number of successful exits, including selling Intrinsity to Apple in the early 2000s and Luminary Micro to Texas Instruments in 2009. 

She has raised over $100M in venture capital for her companies and is now on her fourth tech startup, UnaliWear, a wearable “OnStar for people” watch to provide discreet support for falls, medication reminders, and to guard against wandering.  

In our discussion with Jean Anne, we talk about:

• Having multiple strategic investors on your cap table

• Being prepared for your buyer to change the terms of your exit days before signing

• Knowing what you should say “no” to when raising capital or selling your company

M&A News 📰

• Food: Energy drink giant, Monster, acquires performance-enhancing drink brand, Bang Energy, to enhance their zero-sugar and better-for-you segment.

• Education: EdTech company BibliU acquires privately held Texas Book Company, a leader in providing affordable learning materials to higher education institutions across the U.S. This builds on their digital-first portfolio and expands their delivery models, geographic reach and technological innovations.

• Natural Resources: Multinational energy corporation, Chevron, acquires Hess for $53B in a deal to own a highly-coveted oil field in Guyana and shale properties in the Bakken Formation in North Dakota. 

• Tech: Databricks agrees to acquire enterprise data startup, Arcion, for $100M after a $500M funding round in September. Investors include Nvidia and Capital One.

• Esports: Gaming analytics and esports brand company, Gamesquare, acquires gaming influencer group, Faze Clan, for $17M. Dallas Cowboys owner Jerry Jones is one of the investors on board with welcoming back the original Faze Clan leadership in an effort to win back its core fanbase. 

That’s all for now. 

Tune in next Wednesday for another set of M&A lessons, and have a great rest of the week. 👋