Sold Not Bought: The Internal Roadmap And The External Narrative
Editor’s note: This is adapted from a talk given by Geoff Lewis, a venture capitalist at Founders Fund, about how to plan ahead to sell a company. He previously cofounded startup TopGuest. This is the second of three posts.
In Part 1 of Geoff’s talk he discussed folding M&A into the fabric of a startup’s roadmap–the terminal plan–and mapped out how to begin creating this plan. Here, in Part 2, he gives further strategies for appearing more attractive to acquirers.
ADJUST THE ROADMAP
Once you’ve identified prospective acquirers, you’ll want to adjust your internal roadmap in order to set yourself up for success with them. The key here is to not change what you’re actually doing. If you’re in advertising analytics and you want to get acquired by an eCommerce company, you shouldn’t suddenly open an eCommerce store. But what you should do is make the small tweaks needed to set up your chances for success.
The first thing to do is remove blockages. If you have an odd biz dev deal where the company that you have the deal with owns your IP, you would want to try and get out of that. If your engineering team is on a skunk-works project that’s going to take 4 years to finish but you only have 6 months of runway, you’ll want to stop that. If you’re being sued, try to settle that pending legal action before beginning the acquisition process.
There are always things you can do to increase your company’s strategic value, and these low-hanging fruit pieces should be done before you start talking with acquirers. How do we define “low-hanging fruit?” Generally as anything that has little or no dev complexity but high strategic upside.
One hack I’ve seen work well is if a startup has really good people but isn’t much concerned with titles—you may have a great engineer whose title is junior engineer, or you may have a BD person who’s an “analyst”—you can inflate titles to make the company seem more appealing. And so on.
CREATING THE NARRATIVE
By far the most important thing you can do is optimize the narrative of your company to the outside world. In growth mode PR doesn’t much matter–who cares what random people out there think about your company? But in an acquisition the reverse is true–PR is very important.
To make this work for you you’ll need to create a narrative and to get other people to tell it on your behalf. With this route potential acquirers out there hear the narrative about your company from credible third parties, not from you. What is a credible third party? Industry blogs, subject experts, even inclusion in a conference talk. To capitalize on this proxy soapbox, you need to create a rocket ship narrative and then get other people to convey it for you.
This is trickier than it sounds, because the narrative needs to be true—it can’t be that your startup is doing something that it’s actually not. At the same time it has to be detached from reality, in that it can’t be explicit that you’re trying to sell your company. When articles break on TechCrunch or Business Insider that companies are trying to sell, that’s not good press. Instead, you want to have the narrative focus on what your business is doing, what you’re working on, why it’s interesting.
I’ll use my startup, TopGuest, as the case study here. Internally we weren’t doing very well–we were fighting, didn’t have product market fit… But for about 3 months I devoted a bunch of my time to PR, getting people to talk about us, getting people to write about us. This translated to a rocketship narrative that was totally detached from reality: The company was thriving.
As an entrepreneur it’s weird when this happens, eating your own dog food, so to speak, personally buying into a narrative you know to be false. But you have to remember that this optimizes the optics of selling your company. Whether it was the Wall Street Journal, All things D, Read/Write, TechCrunch, or other, there was a ton of good press about us, and this even culminated in us winning an award for being one of the hottest startups in our space. We didn’t feel hot behind closed doors, of course. But the lesson here is: If we could do it, so can you. Creating a rocketship narrative is hard, but it’s not rocket science. And it percolates throughout the business world, and will build a kind of persona of your company–hopefully a good one–that will be in the backs of the minds of executives at potential acquirers.
Editors’s note: Stay tuned for part 3 of Geoff’s post for the conclusion of his talk.