Josh Felser
Jun 25, 2015 · 4 min read


You want every acquirer to believe that “companies are bought not sold” but most of you, founders, need to behave as if “companies are sold not bought”. Stay with me.

You are the genius founder of your company with a soon-to-be massive global audience and innovative tech that’s changing the world. You are the BEST. But despite your Fortune 40 under 40 status, the force is stronger in another in one vital area: M&A. In M&A, the corporate development executive reigns supreme over you. This trained professional lives and breathes the art of the deal and is judged not only by bagging you but also by extracting the best possible terms for the acquirer. You’d be surprised by how many of your unsuspecting peers have made the mistake of going it alone and toe-to-toe with these seasoned vets.

I am fortunate to have started and sold two of my own startups (Spinner and Crackle) for a combined $385mm and worked with most of the 20 Freestyle portfolio cos that have been acquired. With every sale, I add to my reservoir of knowledge and while I still have much to learn, here are some tips that I have picked up to date.

Don’t be a hero: Unearth a brilliant corp dev veteran to have your back. Could be a trusted investor (angel or VC), advisor, attorney (rarely but some are good M&A coaches) or iBanker. Ideally your investor is your consigliare but only if your agendas are in line. Bottom line is pick someone experienced that you trust and stay connected to them every step of the way.

Every interaction is a sales opportunity: Every single email, call, tweet, text or meetup with anyone at the acquiring company is a chance for you to make your case. The smart buyer will roll up all of the conversations its team is having with you to develop a complete picture of your worth and competency.

Less is more: The more you talk/write, the more desperate you seem and the more likely you are to say something you will regret. Always be calm, cool and unemotional no matter how much you are freaking out underneath.

Corp Dev vs Bus Dev: Typically corp dev handles M&A (and sometimes investment) and bus dev does partnerships. If you want to be acquired make sure you are talking to corp dev.

Operating Deal: Focus on the partnership theme with your acquirer, where relevant, for as long as possible. Always wait for the acquirer to make the first move on transitioning the convo to M&A.

Valuation Game: Safest answer when asked about valuation is “We are going to let the market decide so give us your best offer”. They will push you to go first but resist with one exception. Sometimes, when you are pre-revenue or pre-demonstrable traction, you will need to anchor the price before the buyer does. Key here is to choose a price that is high but not so high that it turns off the buyer. Setting valuation is an ffing art.

Create Urgency: You must create tension in the system, otherwise buyers tend to wait till “tomorrow”. Other than having another offer, the second best ally is time. “Our conversation is not keeping pace with others”. “We’d like to understand your interest level sooner than later because we have strong investor interest in our next round of funding”

Don’t lie: Everyone exaggerates but don’t make shit up. If you say “we have a term sheet and 2 weeks to make a decision” the Corp Dev person will know you are fibbing since term sheets explode well before that.

Desperation: Never ever share that you are running out of money or options. Desperation is very unattractive.

Transparency cuts both ways: Of course buyers want to know the truth about your biz, BUT so do you, so put the buyer on notice at the start of the process. Tell them you expect regular and open communication as a sign that the deal is progressing. Nothing more stressful then a convo going dark.

United Front: Make sure all your key employees are on board and on the same page before they interact with the acquiror. Divergent interests and stories is the quickest way to kill a deal.

Cap Table Game: Don’t show the cap table until after you at least get a verbal offer. Buyers never use a cap table to increase an offer but rather to split the cap table and lower the price.

Splitting the Cap Table: VCs hate it when acquirers don’t pay out everyone on the cap table based on their pro rata ownership. This is where investors’ and founders’ interests can diverge. Though sometimes splitting can’t be avoided, I pushed back against my my startup’s acquirer because I felt like my friends, family, angels and even my VCs didnt deserve to get screwed.

Bad cop: Use investors, your board, the team and God as a foil to avoid putting yourself in a corner with no wiggle room.

Your Sponsor is your ally: Make the business unit that wants to acquire you, your ally. Work them. You want them telling the corp dev exec not to fuck up the deal. Remember every interaction is a selling opportunity.

Keep it Quiet: As much I believe in transparency, you must postpone sharing with your team as long as possible. There is nothing more demoralizing than an acquisition that goes south. You want the team to keep working.

Thanks to @villispeaks for adding value to this post.

on startups

building the dream

Josh Felser

Written by

Seed investor/serial entrepreneur. Co-founded: Freestyle (Early stage VC), Spinner (sold to AOL), Grouper/Crackle (sold to Sony)

on startups

building the dream

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade