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The Boring Stuff You Need To Sell Your Startup

Some advice after an exit

From the press release. The papers aren’t real, but you really do need paperwork

Scaling a startup is one thing, and sure, move fast and break things, but if you want to exit, you need to sweat the small stuff. That means your accounts, auditing and record keeping. If you don’t, you can take a significant haircut on your valuation, or you may not be able to exit at all.


Nobody asks for your accounts when they’re buying your product, but they do when they’re buying your company. In a very real sense, your balance sheet is the company. Keep it clean. Keep all your financial reports clean. And everything that feeds into them. We didn’t, and it was a huge pain in the ass at the end.

At the beginning we did not keep good accounts. I used my own and family money, and just wrote cheques as needed, sometimes not even writing the counterfoil. To a degree this enabled us to move fast, but honestly, it wouldn’t have taken that much time to do the basic accounts properly.

Because I didn’t do this, later accountants had to spend months getting things in order, which was impossible up to a point because it was built on a pile of garbage. We also got audited by the tax department and hit with a frankly unjustified bill just because I was stupid.

Beyond that, the more immediate impact is that I was never using accounts as a metric for our business. You improve what you measure, and while we increased users and brand value, we always struggled with revenue and monetization, and especially cashflow. If I had been keeping and monitoring the accounts better it may not have affected the user experience, but it could have created a more valuable company.

The final impact was when we were exiting. We barely survived the due diligence done by a proper accounting firm. While the business was successful, the accounts were clearly amateur hour, and this did have an effect on the final offer. The whole process also took time, which is also money.

Basically you lose money but not keeping your accounts well.


I asked one investor the first thing they looked for in a company — they said the auditors. I asked another what was the first thing they set up in a new company — they said the audit committee. We paid attention to neither of these things.

We treated yearly audits as a rubber-stamp and went with smaller accounting firms. In hindsight I should have gone with a Big 4 accounting firm, even though they were expensive. It may seem like overkill for a startup, but having E&Y or PwC audit your accounts just makes investors and buyers much more comfortable. They basically stop asking questions.

The other part of an audit is the process. In practice this means having a strong audit committe. I’m on the board of a public company now, and I was appointed to an audit committee myself. At first I was like ‘what is this boring shit’, but I have now learned its value.

An audit committee is just a meeting where people pay attention to the boring stuff which only becomes ‘interesting’ when it catches fire. Reading and approving the accounts, liasing with external auditors, quantifying and talking about risk.

When you’re running a startup it’s tempting to just have board meetings and talk about strategy and KPIs, but if you don’t regularly check on license renewals, tax implications and accounting standards, they become huge, time-consuming and possibly fatal problems later. Having an audit committee is like getting your car serviced. Most of the time it’s mundane, but it keeps you from blowing a gasket and going completely off the road. It also means that when you’re selling your car, a buyer can see that it was well maintained.

Record Keeping

Finally, when you are selling your startup, there will be lawyers and accountants involved, and they will ask for stuff. Part of this is a test. If you have the documents readily available they know that you’re organized. If you don’t, they’ll ask a lot more questions, and take even more time.

It’s important to remember that any sale is a ticking clock, and time is not on your side. The money they’re offering becomes less valuable every day (time value of money) and an offer that doesn’t close is always closer to being dead.

During the process we created a Virtual Document Room (just a set of folders on Google Drive, containing scans and files), but we should have had all that stuff ready before the buyer even knocked. Assembling it took time, which was money.

If I was doing it again I would start the company with a simple VDR structure in place and just keep adding documents. Then if we ever had an investment or sale conversation I could just send the link. It would take a monthslong due diligence project and change it into one email.

For reference, these are the folders we had in our VDR:

1. Corporate Information (registrations, cap table accounts)
2. Land (empty for us)
3. Material Agreements (contracts)
4. Employment (all employee files)
5. Litigation
6. Intellectual Property
7. Tax

For the exact structure it would pay to get some advice from your auditor or an accountant (or someone experienced), but this is basically just good record keeping. It doesn’t have to be online, you can keep good physical records as well, but it’s just something that has to be thought about, updated, and monitored by an audit committee.


Still, none of this matters if your product sucks. You can have perfect record keeping and nothing worth recording. We managed to sell our startup without doing this stuff right, but it was honestly a huge headache and cost time and money.

If you’re venture funded or just not stupid this may be unnecessary advice, but we were so focused on the product for users that we neglected the product for investors.

Ultimately your accounts are your company, so keep them in good shape. Get outside help to monitor everything, and have packed and ready for whenever you get that call. You should literally be able to walk out of a meeting and have your company in that investor’s inbox before the coffee is cold. And no, you should not send them another deck.

People get sold on the dream, but what they ultimately buy is a bunch of boring documents. Spreadsheets, scans, letters, and signatures. Do a little bit all the time and save time and money at the end. If I could do it again, that’s what I would do. Would have made the exit a lot smoother.