Landing an exit was a winding, eight-year journey for Toronto-based enterprise mentorship software startup 10KC (Ten Thousand Coffees) that featured plenty of bumps in the road.
Two years before securing a $75-million CAD majority growth equity investment from US-based Five Elms Capital in late 2022, 10KC was less than two weeks away from selling to an unnamed and publicly traded strategic acquirer when the deal suddenly collapsed, 10KC co-founder and former CEO David Wilkin told attendees at TechExit in Toronto on Thursday.
David Wilkin, 10KC
“I will never forget
that call.”
Speaking on the MaRS Discovery District stage, Wilkin said the bootstrapped business had spent six months, invested $150,000 in the process, and already begun thinking about what it was going to do with the resulting funds before its prospective buyer walked away from the transaction with little notice.
“I will never forget that call,” Wilkin said. “I will never forget the weeks after that. I thought everything was never going to turn around.”
This was something 10KC’s lawyer had flagged as a likelihood, but the startup chose to ignore in favour of advice it was getting from advisors, Wilkin said. He and his colleagues were not sure what to do, and even considered winding down 10KC before deciding to stay the course.
That choice, and some other steps that 10KC took afterwards, ultimately helped the tech startup (which had scaled to $10 million in revenue) obtain eight term sheets for investments of between $75 million and $90 million at nine-figure valuations from strategics, private equity firms, and family offices in 2022, Wilkin said. That process culminated in the company securing five times more from a stronger partner in a significantly better deal, he noted.
One key contributor to 10KC’s eventual exit, Wilkin said, was the detailed spreadsheet he had built of 200 possible investors and buyers who had contacted 10KC over the years, spanning the names of people at interested firms with decision-making power, their mandates, and contact information. That data ended up being far better than most advisors could offer.
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When two of 10KC’s biggest competitors south of the border were quickly snapped up, the startup embarked on a process of its own, with a lawyer it trusted, and began working its way up that list from least to most desirable in a series of sprints. That allowed the company to explore its options and hone its pitch before eventually landing on Five Elms.
For other entrepreneurs facing similar situations, Wilkin said one method of assessing whether that initial deal was real that he wished he had employed was to ask for a detailed workback schedule with steps and dates outlining how the firm plans to get from term sheet to closing.
According to the 10KC co-founder, all of the serious buyers the startup engaged with afterward provided this, while the pretenders claimed they could not because they were proprietary, or shared vague answers regarding next steps.
“If you just have a few really open conversations with your buyer about that spreadsheet or path, you’re going to find real deals … And the fake [acquirers] are going to be really weird about it,” Wilkin said. “It’s going to be like quicksand.”
Feature image courtesy TechExit. Photo by Dasser Kamran.
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