Some corporate development advice for startups

So last week I had a call with a good friend which happens to be one of the world’s most successful M&A advisors in the digital and tech industry. Here is some corporate development advice he gave us:

  1. Make the business really international: If it is a British or Dutch company with 80% of revenues and employees in Italy, it is actually an Italian company. Italian, Portuguese and Spanish companies are more difficult to sell and less attractive (sad but true…). British, Dutch and German companies can attract capitals more easily. An international company that has a potential to grow globally is more interesting and more valuable.
  2. Make Official Audits: Even if it is expensive, start from the first year to make official audits of the company. It will ease any due diligence process, the seller will have less liabilities and the buyer will feel safer.
  3. Choose an International Accounting Standard: Together with being compliant to your local accounting requirements, start from the beginning by applying and complying to an international accounting standard (IAS/IFRS).
  4. Verify the Legal and Fiscal Implications of the Business: Study well the legal and fiscal implications of your system. Many innovative and disruptive startups break consolidated trade rules or government regulations (consider topics like privacy, banking rules, etc.). Investors look at the upside but also the risks. The higher the potential of your business the higher they will value the company, but consider also high risks lower the evaluation. If you think you might be in a grey area of regulation, consider to get a legal opinion signed by a credited legal studio to certify the business is legit and not breaking regulations.
  5. Don’t wait to create your data room: Create it from day 1 and maintain all your official files in a closed and secure virtual data room. You might have an investor or partner around the corner, and if that happens you want to be quick and focus on the negotiation, not on collecting documents. Also, you will show you are tidy and that is very important.

As founders and managers of a startup, we tend to focus so much on getting the business going, that we risk overlooking the details that are really important from investors point of view. The above is valuable advice we will follow, and thought is worth sharing.