Do These 7 Things To Accelerate Startup Acquisition
Quadruple the chance of selling your startup.
Private equity is worthless. It is upending a faith until second comings — acquisition and IPO. For most startup founders an exit is a dream aspired, not necessarily convinced.
In the last decade, going public was an uptight exit strategy. Today, the reality is reversed. The excruciating pain of following through with the expensive broken system cum stringent technical requirements, fall the route apart.
More than ever, startup founders have grown profound interest in acquisitions rather than pitching tents for public assaults. Hence, as a wise bride, how do you prepare and position yourself for the right suitor?
Here are seven things to keep atop of mind to quicken your startup acquisition:
Definite Optimism
“You are not a lottery ticket.” — Peter Thiel
Having a quick ( even slow) acquisition is not premise on luck and chances. You must be deliberate about your pursuit.
Generally, most startups fail. Building with no clear path to exit is similar to fighting with no rules for victory. It can only lead to the death of one of the fighters and the market is ever standing.
You must be optimistic about the acquisition and be definite on your path to its attainment. Do your research on the companies that need your proprietary technologies the most.
Curate a list of your prospective acquisitors. Cut down your list to focus your gaze on your vital few.
Know it is your job to get these companies' attention. Know the key players in the M&A division. Do your due diligence.
Don’t try to sell them your company from the start. Pitch them to contract your services. Bring them in an investment round. Be subtle, yet hunt for a substantial relationship.
Be open. Get their key players to know and romance your team, your culture, and big visions.
Positioning
PayPal accounts for a large percentage of transactions on eBay right before its acquisition by eBay. Paystack is famous as the Stripe for Africa years before its $200M purchase by Stripe.
In essence, what these historical startup successes have in common was good positioning. Both PayPal and Paystack align their brand to match their acquisitors.
It becomes a no-brainer that eBay should acquire PayPal as Stripe has embraced Paystack as a child company even before the financial merger.
Product fit
It is important that your product attunes to your buyer. It must fit so well to be considered a need.
Note, need triumphs want here. Need means it is essential and truly fits into the prospect’s offerings or will help them better a product line.
Here is an excerpt from the New York Times article briefing the Google YouTube acquisition:
The acquisition of the privately held YouTube will enable Google to thrive in one area of the Internet where it has so far failed to gain footing. According to Hitwise, which monitors Web traffic, [YouTube] has the lion’s share of online video traffic. YouTube has a 46 percent share, MySpace has 23 percent and Google Video has 10 percent.
From the above, it is obvious Google has a need for YouTube. Facebook's acquisition of WhatsApp of $20 million in revenue for $19 Billion points to a dire need by Facebook.
Microsoft four-folds premium on Github that led to handing out $7.5 Billion doesn't end on the good notion to “strengthen our commitment to developer freedom, openness, and innovation.” as avowed by CEO Satya Nadella. No doubt, there is an underlying need to penetrate the cloud computing market.
Calibrate your product to solve a really pressing need. Work your butt to get noticed, then expect the obvious — a big-time cashout.
Complementarity
Not competition makes for an acquisition. Even while PayPal was competing with eBay Billpoint, it makes eBay's auction better altogether.
Most times, it is best to focus on the Non-Consuming market. You are most valuable if the pool of your customers is those the prospective acquisitor struggle to reach.
WhatsApp dominates mobile messaging. Instagram dictates Photo Sharing. FriendFeed was a real-time feed aggregator. Every acquisition complements Facebook’s quest as the social media giant.
Culture
“Company culture doesn’t exist apart from the company itself: no company has a culture; every company is a culture.” — Peter Thiel
In the event of an acquisition, the team, and the culture are a crucial consideration for most buyers. Often times, it is what matters the most.
Wimdu, the Airbnb knockoff actually got CEO Brian Chesky on his heel to seek help. He did consider the 25% stake demands by the Samwer brothers.
However, he feared the “finance-centric and metric-driven team could harm Airbnb’s design-driven culture.” Thus, he refuted the request and shoot to blitzscale.
Quite frankly, you also should not look forward to slaughtering your beloved startup in the hands of a cruel acquisitor. Culture fitness is a two-edged sword. As much as your buyer solves for culture fit, you should be critical of whether the company’s culture matches yours.
In terms of technology and company culture, “It is hard for me to imagine a better fit for two companies,” said, YouTube co-founder, Steve Chen. It is a no-brainer then that YouTube thrives under its new owner.
Be profitable
“It always takes longer than you expect, even when you take into account Hofstadter’s Law” — Douglas Hofstadter
Trust me, you are going to build the next WhatsApp. Even if you will, an acquisition takes longer than you expect.
Pending your acquisition ensure not to run out of cash. Be cash-positive enough to ensure your continuous product innovation and development.
A clear path to profitability gives you a huge edge. Nobody buys a piece of crap.
Finance
Lastly, set your numbers straight. An acquisition is a financial transaction. Bad numbers do not position your startup as credible.
Work closely with your finance team to ensure the numbers tell the true story of your brand. This is basic advice, yet lots of startups lack proper financial records.
Ineffective financial management accounts for most sudden running out of funds, under ( and over-bloated) evaluations, and ruinous financial commitments.
It is essential you put your finance in proper shape with corresponding forecasts and budgeting devoid of good feelings and attribution errors.
I strongly hold the view that increased awareness can better the startup ecosystem and reduce the stack of odds against founders. Good luck.
