The exit starts with positioning your startup!
One of the aspects of building startups that shrouded most in mystery is exit’ing by acquisition. But there is actually quite a bit you can do yourself as a founder…
Those who read my blog a lot, will know that I don’t believe in any other luck than what you are willing to work hard for. Not surprisingly, this goes for exiting as well. It is something you largely have to make happen yourself…
A few days ago I had the pleasure of having dinner with Saadia Rodgers-King, a co-founder of Hot Potato who managed to start, get funded and get sold to Facebook in about one (1!) year. Naturally I was interested in his thoughts in acquisitions:)
From what I gather Hot Potato got sold to Facebook because the key people at Facebook already know the startup and its founders. So Facebook had the chance to keep an eye on the company and slowly fall in love with the company. So it was about network, and about keeping Hot Potato well positioned as Facebook was also talking to competing startups.
Tommy Ahlers, the CEO of Podio, who sold Zyb to Vodaphone a couple of years ago used the same tactic. He made sure Vodaphone had Zyb on their radar by entering into a small (relatively) commercial agreement with the mobile giant. There are tons more stories along these lines…
My own humble experiences include selling my first little company to a supplier, they knew our operations well and got interesting in purchasing the company over time as they started seeing opportunity in the client list we could add their operations.
The most likely reason for your startup to be acquired are:
- They are purchasing the clients (new territory/ hard to win contracts). This can come down to a simple mathematical decision of whether it is cheaper/faster to buy you than out-compete you.
- The want a strategic move into your area. Well know with with digital businesses who get purchased by the old-fashioned giant. Such as e-reader technology bought by old publishing houses.
- They want your executives or engineers. Founders rarely quit their startups. But if you buy their companies they then effectively work for you. Frequently seen at Facebook and Google.
- They want to close your company down, because it is becoming a pain in the arse to compete with.
So, if part of your strategy is to be acquired (which for the record, I believe is a stupid strategy) or if you are building a successful company but open for the right offer (much better) then you should start to get your company on the radar of possible acquirers. Make sure they know of your technology or competitive advantages, and that it is more effective for them to buy your company, than to build the division themselves.
People to follow:
@saadiq. Saadiq Rodgers-King. Now COO at Nodejitsu (A much loved company here at @foundershouse where the developers have started a Node.js club:))
@aahlers. Tommy Ahlers. Now CEO of Podio.
