How I Decided Who Should Buy My Startup

You have a choice if you make the right decisions

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Startup founders usually have a lot of misconceptions about getting acquired. And most of the time, the strategies they follow result in a an unmitigated and unnecessary loss.

One camp of these misguided founders builds their business just to sell that business. There’s nothing inherently wrong with that — I’m not going to go all startup purist on you. The other camp will do everything to keep acquisition off the table until selling out becomes a necessity to save their business. Again, this isn’t the problem.

The problem is that both camps usually ignore a fundamental step: Selecting their acquirer.

Despite what you might think, the only scenario that leads to not being able to choose your acquirer is the one where you never think about who that acquirer should be. This is true whether you’re building just to sell or building to never sell. Or anywhere in between.

I don’t have a failsafe strategy to determine when and how your startup is going to get acquired and by whom, so I’ll just tell you what I did.

A Tale of Two Startups

I’ve been working within the startup universe for over 20 years. To solve a thorny problem that I had tons of experience with, I founded ExitEvent to connect startups to better information and resources.

Among the many features I built into ExitEvent was one of the first Expert Two-Sided Marketplaces. Three of them, in fact. One marketplace connected startups and service providers, a second connected startups and support organizations, and a third connected startups and investors.

This was 2010, so no one really knew what an Expert Two-Sided Marketplace was, but what I was doing was exploiting an artificial market inefficiency around startup, one that I had become intimately familiar with.

Service providers, support organizations, and investors all wanted to work with startups, and startups needed to work with them as well. Because startups are usually broke, service providers would readily offer a discount in the hopes that some of these folks would start making money and become a full-paying customer. Support organizations wanted more names on their website to show to more sponsors to be able to get more money from those sponsors. Investors wanted more and better-vetted deal flow.

None of those three entities knew how to engage with the startups they were looking for. It was all throw-shit-at-a-wall and see what sticks. This way of operating is expensive, time-consuming, and it also bugs the living crap out of founders who get inundated with people trying to build relationships when all they want to do is build their startup until they actually need those relationships.

I came up with a way to track data around startup progress and a double-blind vetting and referral system that put the power to engage in the hands of the startups themselves. Boom. Problem solved.

Now, my problem was that I had started ExitEvent a few months before I joined up with the founder of Automated Insights to build that company. We had raised $6 million and by the time ExitEvent was starting to scale, we were about to go after a Series B for another $6 million.

My time was about to disappear.

Phase 1: Decision time.

I couldn’t hand ExitEvent off to an employee. I had a couple employees by this time, but they were very good at doing their specific jobs. I was still building out the tech, but more importantly I was still running point on the mission. Plus, I had tried the handoff route before with a previous company and that had blown up in my face.

ExitEvent had acquisition interest almost from the beginning because it had its own content marketing built in and it had an event that was becoming widely known up and down the east coast. This acquisition interest was not a “good problem to have.” ExitEvent was way undervalued because the people who were interested in acquiring it just wanted the content noise and the event party, not the revenue generating marketplace under the hood.

I could have just handed the company over to one of those already-interested acquirers. But then the mission would have been lost and it would have become something I didn’t want it to become — just another website promoting entrepreneurism without really helping entrepreneurs. Plus, I didn’t want a fire sale.

At the same time, I knew the acquisition wasn’t going to bring in what I believed ExitEvent to be worth. I knew that there was much more money to be generated from my revenue model. This was the most painful part for me. I would never have sold the company at this point, but I knew within six months I would have to.

So the first thing I needed to do was very quickly find and choose an acquirer who believed in both the mission and the value.

Phase 2: Developing the selection criteria

The first thing I did was map out who should buy my company and why, then I balanced that against who I could reach and what the prospects were for demonstrating the value of the company in a short period of time.

The acquirer would have to have deep pockets. While ExitEvent was notoriously inexpensive to run and already profitable, it was still pretty early-stage. Had I raised investor money for it, I probably would have gone for at least a $2–3 million Series A.

The acquirer would have to have the right business model.

  • I didn’t want a non-profit, I had already been down partnership proposal roads with that bunch, and their missions, despite what you might think, did not align with actually helping entrepreneurs build great companies.

The acquirer would have to have (or hire) the tech talent to extend the app. I had two years worth of product pipeline my customers were telling me they wanted. Eventually, all the potential acquirers got to see the code and we discussed strategies for building on the code base.

The acquirer would have to do it without me. My time would be tight. I would agree to remain on the board and advise, but at no more than a couple hours a month.

Phase 3: Selecting the Final Four

I wasn’t doing Phase 1 or Phase 2 in a vacuum. I was talking to people at the same time I was deciding who I should be talking to. In the end, a lot of those companies fell away.

One was a nationwide non-profit that had just gotten off the ground. After six or seven calls with different members of the org, including 90 minutes with someone whose name you’d know, I still didn’t understand what they did.

Another as a regional incubator whose plans for ExitEvent were way too small.

Then a number of them fell away because they couldn’t get off a revenue-share model, or a start-small approach, or some other deal where they could share the profits and not the work or the risk. I don’t blame them, but because of my circumstances, this was an all or nothing deal.

And as it turned out, sticking to those guns actually made it easier to figure out who believed in the model and who didn’t.

Before I even started talking hard numbers for the deal, before I even signed NDAs so I could show them the data around revenue and growth, I selected four companies who I thought would not only acquire the company, but who I thought would be the best candidates to carry on the mission.

Then I went after all four, hard. In a future post, I’ll go over the negotiation process and what I learned from that.

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Written by

I’m a multi-exit, multi-failure entrepreneur. Building Precision Fermentation & Teaching Startup. Sold Automated Insights & ExitEvent. More at

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