Getting your start-up acquired
Why start a start-up? Because you have a passion. This may be a passion for a cause, or passion for a market. Either way, those who create start-ups are necessarily driven by the awareness that what they are trying to do in business provides a new way of doing things. As such, those who want to be at the forefront of new businesses attract similar-minded people, who enjoy the challenge and thrill of building a business. But how do you, as the founder of a start-up, ensure the long-term survival of your business? How do you set your business up for acquisition?
What is a business acquisition?
A business acquisition can often be labelled a ‘liquidity event’ within the entrepreneurial world. This is where investment in a business essentially pays off and returns are made on such an investment. An acquisition is where a larger business will offer to usually buy a company outright, or merge with the business to provide greater resources in exchange for a share of returns and market access.
Start-ups often rely on being acquired to satisfy any major investors that have initially helped grow the business. An investor, such as a venture capitalist, often has their own investors to whom they promise high returns. With the money they receive, they invest in various business start ups in the expectation that a small percentage of these will create high returns, a larger percentage will create smaller returns and an equally large percentage will fail.
Unless you intend to provide investors with direct returns and keep your business, it is likely that you will aim to develop a business with a clear ‘liquidity event’ in mind, where you may become a listed company, or be acquired.
Keeping acquisition on mind
- Remember that the acquisition of your business should be relegated to the background as you act as a founder of a start-up. It is not more important than your product, market, customers, development, staff, finances or anything else that constitutes the creation of a successful business. However, it should be a background concern for you in that it helps drive your decisions, such as your networking activities.
- Run your start-up with acquisition in mind from day one. You may even have direct conversations with investors further down the line about expected timelines for mergers/acquisitions, but you should still have a clear idea of how your business will operate with acquisition as an end goal.
- Separate your acquisition goals from staff. They are working for you because they share a passion for your product, not for its eventual acquisition. Market the idea of your start-up’s acquisition to your staff in terms of ‘long term growth’ and innovation, rather than optimization for liquidity.
- Make a list of the sorts of companies that may be interested in merging or acquiring your company in the future. Think laterally and include those that you may not initially consider. Find business development managers for these companies and keep tabs on them for the next several years, forging connections with them and sowing the seeds for potential acquisition.
- Be active in driving business development. As your start-up grows, you may get to a point where there is a need to bring in a professional development team, especially a business development manager, to find potential parent companies. However, if you have built your company up with the end goal in mind throughout, you will have a clear idea of, and connections with, these very companies.