What I Learned Each Time My Startups Got Acquired
I’ve founded, co-founded, or been early at 12 startups in my career. Of those, eight were exits (six via acquisition), two stagnated, one was a dumpster fire, and one is still in play.
In each of the acquisitions, I made mistakes before, during, and after. I learned lessons that I carried into the next startup, and because of those lessons, each subsequent acquisition was bigger and more successful than the last.
So I’m not only hoping to hit the motherlode with my current startup, but I also know what to do when an acquisition happens. If it happens. No matter how it happens.
I’ll walk through five of those acquisitions, and pick one thing I should have done differently, either before, during, and after.
№ 1. Financial Dynamics > Spectrum > CIBER
My first job out of college was not with a startup, but rather at a large technology consulting firm. I was the sole developer on a new project, for which I was receiving zero credit. That credit went to my boss, his boss, and her boss.
So I didn’t get into startup to get into startup. I got into startup to get the hell out of a job I hated. I landed at a tiny software consulting startup in Raleigh called Financial Dynamics. The environment there was the exact opposite from the giant firm I had just left.
Financial Dynamics grew like mad, thanks to a key pivot. We created frameworks to handle 80% of our software development so we only had to do 20% of the custom work. We soon walked away from custom work completely and focused solely on licensing the frameworks.
Thus, we turned a service company into a product company.
In three years, we grew to 400+ people in six offices. We were snapped up by Spectrum, a large consulting firm, who within two years would be snapped up by CIBER, a massive consulting firm.
Lesson Learned: Have a stake before
How did I make out? Dude. I didn’t even know what a startup was, let alone what options were. So I had next to no stake in the company when we were sold.
Just because you’re at a startup doesn’t mean you’re going to get rich at the exit. I got a nice check and a new boss when we were acquired.
Of course, within a few months of the acquisition, everything about the company changed. It started to look exactly like the company I had left. This isn’t an uncommon thing with an acquisition, but it was my first time going through it. So I did what any young kid would do in that situation, I took the first competitive offer that came my way.
№ 2. STEP > Spectrum > CIBER
Our main competitor at Financial Dynamics had been a smaller firm called STEP, and they were pretty quick to get me into the ground floor of their new Raleigh office. This time I made sure I had options, I knew how much they were worth, and I knew the company planned to be acquired themselves within the next two years.
I jumped, and while I had influence in the direction of the Raleigh office, I was not a founder, and I had no influence over the type and volume of clients that suddenly started appearing in the pipeline. We were closing anything and everything that came our way, and before too long, my team was doing work we didn’t want to do for people we didn’t want to be working with. We lost a few good people, overworked and way overstressed by unreasonable deadlines and unreasonable clients.
Lesson Learned: Have input before and during
While it makes sense to plan for an exit, it rarely works when you completely conform the company to meet the exit. We were working strictly for our balance sheet and bottom line, pushing hard to raise our valuation to be bought by the very same firm that bought my old firm.
I had no input into that decision either.
Yes, I made more money this time, but I ended up nearly having a nervous breakdown along the way, all to land in the same mess I had left not two years earlier.
№ 3. Bondi > SilverStream
The third acquisition was kind of standard and happened almost by accident, mere months after I joined the company. I survived a couple mass layoffs and saw the writing on the wall.
By the fourth acquisition, I knew what I was doing. A fellow Financial Dynamics alum founded Bondi to run the same service-to-product game plan, but this time building frameworks in the very early days of Software as a Service (SaaS), what was then the world of web-based applications.
He hired me to build a presence in Raleigh, at the time an untapped market, while he built offices in Atlanta and Los Angeles. Here I would jump in at the director level, and I hired a bunch of people, landed a few clients, and ultimately built the place where I had always wanted to work. I also flew to New York once a month to discuss potential acquisition plans. I had stake, and I had input.
Lesson Learned: Have a future after
His plan was genius. Within a few months of opening the new offices, a large firm called Silverstream bought us out. We all got paid, it all went smoothly, and then Silverstream one day decided to shut down the new offices we had just established. I was offered a position in Chicago, but everyone I had just hired was let go.
It was the first and last time I walked out of a job with nothing lined up.
№ 4. ExitEvent > Capitol Broadcasting
It would be ten years before I considered acquisition again, and it happened with two companies at the same time. ExitEvent started as lark, while I was building another startup called Automated Insights that had billion-dollar potential.
ExitEvent was built on the premise of “What if startup groups actually did something useful?” and soon became a technology-enhanced media and networking site. It was completely experimental, and I’d spend early mornings and weekend late nights singlehandedly coding revenue-generating features into a Frankenstein monster of a web app.
ExitEvent never had billion-dollar potential, but it quickly grew to million-dollar potential. Before too long I knew I had to get out, as Automated Insights was also growing just as fast, but with a couple extra zeroes tacked onto the valuation.
Lesson Learned: Keep a stake after
I made up my mind early not to keep any part of ExitEvent, and I sold 100% of the company and probably made 25% more on the deal for doing so. It was enough for me to take something I built from nothing and hand it off to someone who could take it further.
But four years later, ExitEvent disappeared, broken up and absorbed into the acquirer. It was the right move for the buyer but now I’ll always have this “what-could-have-been” thorn in my side. Was it worth the money? Probably. Would I do it again? Probably not. I’d keep five to 10% on the side, just to be able to scratch that itch.
№ 5. Automated Insights > Vista
It’s hard to look back at this and find a mistake. This one went down almost perfectly. The founder and I put together a plan in early 2010 to build an engine that would generate content from data. In the early days, it was him and me and a couple of intern developers. By late 2014 it was 50+ people and millions of dollars in VC raised and more millions of dollars in revenue.
Vista came calling right after we closed a $5 million Series B, so we didn’t need to sell and that worked to our advantage. We closed in late 2014 and for three more years, we grew bigger and faster, until one early spring day in 2017, the founder decided he was done, and he told me he was leaving to go get his PhD.
A few months after he left, I realized I was done too — physically, mentally, and emotionally drained.
Lesson Learned: Have a plan after
I negotiated a buyout of my contract and went back into the open market wide-eyed and full of hope. Or so I thought. In reality, I was useless. I needed to step back and figure out my next step, and I never gave myself that time.
Luckily, the first person I spoke to was the right person, and while I took three months to “find myself” — two words I thought I’d never say un-ironically, I landed right where I was supposed to be, evolving yet another service company into another product company, but this time, with mobile, IoT, and automation.
If there’s a common thread in all these lessons, it’s this: Never stop looking ahead. Never rest on an exit, let alone on a fundraise. The difference between a startup career and a corporate career is that you’re always moving, always planning, always looking for what’s next. We say it’s what we want, why we get into the startup game in the first place.
But 20 years, 12 startups, and eight exits later, I’m still making mistakes, and I’m still learning lessons.
I know what you’re thinking. What about the failures? Well, here you go.