Stanford BUS 73 — Exit Strategies: Maximizing the Value of Your Company
June 18th - July 19th, Live Online Class
In the world of venture-funded start-ups, where you start and where you end up can be very different places.
Recognizing the fierce competition and profit challenges facing his on-demand car parking app, today’s guest, Sean Behr, CEO of Fountain, was able to steer his former company, STRATIM, away from a crowded field of competitive offerings. Sean set course towards an entirely new category he defined: autonomous vehicle fleet management. Because of this brilliant pivot, Sean sold STRATIM for its maximum strategic value.
Join us as Paul and Sean discuss:
Sean set out to solve a real problem with his original company ZIRX. Ten years ago, almost every service was becoming tech-enabled — grocery shopping, delivery services, handiwork, and more. But there was one exception: car parking.
Traveling in the city has been a massive pain point for years. Expensive parking options, crowded, unfamiliar locations, and a lack of customized solutions cost people time and money and still do.
As a solution, Sean developed an on-demand valet parking app that raised over $40 million from VCs. Using the app, the customer would drive into the city, meet the valet parker at their destination, and while the customer worked, ate, or shopped, the driver could park the car with optional services like washing or refueling.
While the app provided a much-needed service, it was very difficult to make a profit. After seeing so much interest in the software behind the app, Sean and his partners decided it was time for a pivot. ZIRX morphed into STRATIM, a B2B fleet-management software product for autonomous vehicles.
The new product went in the exact opposite direction of the original, creating a brand new category in the process. While exciting, this pivot was challenging because the market, investors, and employees had all bought into the original idea, not the pivot.
“Once you take outside capital, you have a whole different paradigm where investors stick their own credibility on the first idea,” Sean says. “Even if your pivot is well-intentioned and rationally smart — even when it works — it’s a long, tough path.”
According to Sean, one key component to getting people on board with a major pivot is building relationships and partnerships. When you make meaningful connections, you can truly communicate how your business will play a part in the future.
While Sean built relationships in various ways, his business utilized one very strategic tool — a newsletter.
“We decided to become the industry experts in this new world of mobility,” Sean says. “We curated all the news about car-sharing, ride-sharing, self-driving cars, and fleets in cities in a high-end, digestible newsletter.”
By becoming the industry expert, STRATIM gained the trust of its newsletter readers, opening endless opportunities for meaningful connections.
Sean and his partners also hosted conferences, inviting all the big industry players. With time, dedication and a lot of hard work, the team built strong relationships with several major car manufacturers, the nation’s biggest car rental companies and the major players in the new mobility space.
Most founders can’t stand the thought of an acquisition. They are sold on the idea of building a business worth billions. Yet, as Sean points out, most never reach that. More importantly, acquisition is not a sign of weakness or failure, especially if approached strategically.
“Being optimistic about your ability to build a game-changing company while understanding that acquisition is very likely is very important,” Sean says. “In no way is an exit a failure — for most, it’s a wild success.”
Once Sean made the decision to pivot, he knew that acquisition would be in his future. That recognition allowed him to strategically shape the future of the company.
“There are things you can do that bring the outcome you want,” Sean says. Contrary to popular belief, acquisitions aren’t always haphazard and don’t come by chance. By strategically networking and positioning your company toward the acquisition you’re seeking, you’re more likely to get a better outcome.
Taking on this strategic approach requires a shift in mindset. Founders must let go of caring mostly about revenue and month-to-month growth and focus on building connections with the businesses most interested and in line with purchasing their company.
“Companies aren’t acquired because you can bring them customers or revenue; acquisitions happen because of strategic need — either to go after a brand-new opportunity or to protect themselves from some other kind of existential threat,” Sean says.
Want to learn more details about how Sean was so successful? Listen to the full episode of Outcome By Design to learn more.