Concepts
Strategic vs. financial buyer
A strategic buyer is another operating company, usually much bigger, buying you for speed to market, total addressable market, and your team. A financial buyer is a private equity fund buying cash-on-cash returns. A third, hybrid path is the PE “platform and plug-in”: the fund has a thesis in your market, buys you as the platform, and bolts on other companies, with you still running it.
Why it matters
Section titled “Why it matters”Each buyer prices you a different way.
From the room
Section titled “From the room”That valuation is not based on metrics. It’s based on a heuristic that is: what’s the opportunity worth… How long will it take for you guys to build this? Do you have the expertise?
The September advisor’s strategic lens was build-versus-buy: how many engineers and months to catch up, whether the buyer’s distribution could sell more, and whether a competitor might buy first. He cited $10–20M pre-revenue acquisitions as examples from that perspective. His private-equity explanation used industry transaction data, including an illustrative set of 112 transactions trading at 5.2–6x. These are session examples of valuation reasoning, not guaranteed deal prices or a formula every buyer uses.
The people also differ. At a strategic, corp dev works a mandate set for the year; the champion you need is the product owner whose roadmap you would accelerate. At a PE fund, they do not want to run the business; they want to recapitalize it and keep you in the seat.
The October 13 M&A attorneys added buyer-specific questions: what cost could this buyer avoid, which customers or distribution could it gain, and what commercial evidence supports that value? Treat the September build-versus-buy account as one lens. Strategic buyers can still examine financial performance, and financial buyers do not all use one formula. Prepare both the operating evidence and a credible explanation of value to the particular buyer.
Where founders get it wrong
Section titled “Where founders get it wrong”- Giving a strategic only financial metrics without explaining buyer-specific value.
- Courting corporate development instead of the product owner.
- Expecting private equity to pay for the story rather than the multiple.
- Not planning for the hybrid path’s expectation that you stay.
Go deeper
Section titled “Go deeper”- Running the exit process covers all three paths, readiness, and the competitive process.
- Exits, M&A, and leverage covers timelines and how corporate investors pre-wire an acquirer.
- When the search runs out of runway covers the distressed case, where the buyer is purchasing people rather than profits.
- Related concepts: EBITDA multiple bands, Letter of intent, Acqui-hire.