10KC Co-founder Shares Lessons on Engineering an Exit
David Wilkin details the journey from a collapsed acquisition to a successful investment.
1The Collapse of Acquisition
Toronto-based startup 10KC faced a major setback when a near-final acquisition deal collapsed just two weeks before closing. The company had invested six months and $150,000 into the process before the unnamed strategic buyer suddenly walked away. This traumatic experience nearly led the founders to wind down the entire business operations.
2Strategic Pivot After Failure
After the failed deal, 10KC chose to stay the course rather than shutting down. This resilience proved vital as the company scaled to $10 million in revenue. By 2022, they successfully attracted eight different term sheets, with valuations reaching nine figures, ultimately securing a $75-million CAD investment from Five Elms Capital.
3Building an Investor Database
Wilkin utilized a detailed spreadsheet tracking 200 potential investors and buyers who had expressed interest over eight years. This internal database contained names of key decision-makers, firm mandates, and contact information. He noted that this proprietary data proved far more effective than the generic lists typically provided by external professional advisors.
4Executing a Structured Process
When competitors were acquired, 10KC launched its own formal process with a trusted lawyer. They systematically worked through their investor list in a series of sprints, moving from least to most desirable targets. This methodical approach allowed the team to refine their pitch and gain leverage before finalizing the Five Elms deal.
5Identifying Fake Term Sheets
Wilkin warns entrepreneurs to watch for red flags when evaluating potential buyers. Serious acquirers provide a detailed workback schedule with specific dates and steps to closing. Conversely, pretenders often claim such schedules are proprietary or provide vague, evasive answers about next steps, which Wilkin describes as feeling like sinking into quicksand.
6The Value of Transparency
Open communication serves as a litmus test for deal legitimacy. Wilkin suggests that founders should initiate honest conversations about the path to closing early in the process. If a buyer becomes defensive or weird about sharing a roadmap, it is a strong indicator that the offer may not be a genuine transaction.
7Lessons in Deal Engineering
The final deal with Five Elms Capital resulted in five times more capital than the initial failed offer. By ignoring the advice that led to the first collapse and focusing on a broader range of strategics and family offices, 10KC secured a significantly stronger partnership that better supported their long-term enterprise mentorship software goals.
8Resilience in Startup Exits
The 10KC journey highlights that an exit is often a winding, multi-year path rather than a linear event. Founders must be prepared for sudden deal collapses and maintain a robust pipeline of alternatives. Ultimately, the ability to distinguish between serious buyers and pretenders is a critical skill for any scaling startup founder.
Original article: BetaKit — 10KC Co-founder Shares Lessons on Engineering an Exit