Optionality and the Conversations You Need to Have
Summary
For me, optionality requires laying the groundwork, building trust, and continuous open communication with current and potential stakeholders; its energy worth spending to stay in the drivers seat, ride out the next 12 months, and land well-positioned when capital flows back in.For the past two years, weve seen startups stretch their dollars, cut jobs and revise their roadmap as funding dried up. That doesnt mean investors should force founders to put their companies up for sale, but there is a risk it will happen nonetheless if they dont anticipate the next steps.In 2023, Inovias portfolio companies significantly impacted the Canadian tech software sector, with three notable exits accounting for nearly half of the sectors total exit value distributions. In contrast, over the last decade, our team at Inovia proactively engaged with founders from the early stages so they could create options, compare them, and make the decision they were most comfortable with along the way.I believe an exit can take different shapes. In the end, they chose the one they believed was the best for their employees, their investors, and their company.Over the last two decades, Ive come to realize that for all our best exits, we have sat down and worked with the founders, shared our needs, and listened to their aspirations. The idea of letting your winners ride is still going strong in the VC industry, even though we all know there is a time limit to a fund, usually pegged with a ten-year term.So, how do we shake off those habits and still optimize returns?