| Based on Sarah's strategic priorities and situation: |
|
| Valuation Assessment: |
|
| Will Sarah accept $300M? MAYBE, with concerns |
|
| Her valuation thinking: |
| - Sarah believes company is worth $400-450M |
| - Sees similar companies exit at 10-12x ARR |
| - 60% growth rate justifies premium multiple |
| - But: burn rate creates urgency ($12M runway = 12 months) |
|
| What she's thinking: |
| "8x is below market for our growth rate. But we need |
| capital in 12 months. If I wait for Series C, dilution |
| + time risk might be worse than selling at slight discount." |
|
| Acceptable range: $350-400M |
| Walk-away: $300M (only if desperate) |
| Target: $400M+ |
|
| Deal Structure Analysis: |
|
| Cash vs Stock Concern: |
| - Sarah NEEDS $150M+ cash personally |
| - She owns 40% = $120M at $300M valuation |
| - $200M total cash = $80M to her (after taxes: ~$50M) |
| - THIS IS NOT ENOUGH for her goals |
|
| Her thought: "I need $100M+ after-tax to be set for life. |
| $50M isn't enough after building this for 8 years." |
|
| Stock Vesting Concern: |
| - 2-year vest = more risk and golden handcuffs |
| - Worried about your stock value |
| - Prefers cash or shorter vest (6-12 months) |
|
| Her thought: "I don't want to be locked in for 2 years |
| with stock that might decline. I've taken enough risk." |
|
| Role Concern: |
| - 18-month GM role feels like "managed exit" |
| - Either wants real CEO role (3+ years) or clean exit |
| - Doesn't want to be "window dressing" |
|
| Her thought: "18 months means you're planning to replace |
| me. I'd rather exit clean with cash than be pushed out." |
|
| Her Real Priorities: |
|
| Priority 1: Personal Cash ($100M+ after-tax) |
| - She's 45, this is her one exit opportunity |
| - Needs enough to never work again |
| - $50M after-tax is not enough |
|
| Priority 2: Team Retention |
| - Feels responsible for 150 employees |
| - Needs strong retention packages |
| - Will negotiate for team, not just herself |
|
| Priority 3: Product Vision |
| - Wants product to succeed long-term |
| - Concerned about integration killing innovation |
| - Needs commitment to product investment |
|
| If you offer $300M ($200M cash + $100M stock): |
| - 40% chance Sarah accepts (only if desperate) |
| - 60% chance she rejects or counters at $375M+ |
| - Will push for more cash, less stock |
|
| Optimal Offer to Close Sarah: |
|
| Option A: Higher Valuation, Same Structure |
| - $375M ($250M cash + $125M stock) |
| - Sarah gets $100M cash (40% ownership) |
| - After tax: ~$65M (closer to her goal) |
| - 70% chance she accepts |
|
| Option B: Same Valuation, Better Structure |
| - $300M ($250M cash + $50M stock) |
| - More cash upfront = more personal liquidity |
| - Shorter 1-year vest on stock |
| - 75% chance she accepts |
|
| Option C: Address Her Real Needs |
| - $350M ($275M cash + $75M stock) |
| - Allocate $25M for team retention (she'll love this) |
| - Either: Real 3-year CEO role OR clean exit with transition |
| - 6-month stock vest, not 2 years |
| - 85% chance she accepts |
|
| What Will Make Sarah Say Yes: |
|
| ✓ Get her to $80M+ personal cash (after-tax: $50M+) |
| ✓ Show commitment to team retention ($20-25M) |
| ✓ Give her real role or clean exit (not fake 18-month GM) |
| ✓ Reduce stock risk (shorter vest or less stock) |
| ✓ Commit to product investment post-close |
|
| What Will Make Sarah Say No: |
|
| ✗ Low cash to her personally ($50M or less after-tax) |
| ✗ Too much stock risk (2-year vest, high stock %) |
| ✗ Fake short-term role (18-month "GM" = exit plan) |
| ✗ No team retention plan |
| ✗ Integration plan that kills product |
|
| Timeline Consideration: |
|
| Sarah's urgency level: MODERATE-HIGH |
| - 12 months cash runway |
| - Series C would be challenging market |
| - But not desperate (could raise bridge round) |
| - Has 6-8 months to decide |
|
| Bottom Line: |
| $300M at 2/3 cash is below her target. She'll negotiate. |
| Optimal: $350M+ with more cash, shorter vest, team retention. |
| She wants to feel respected, not desperate. |
