Although few founders launch a startup with plans of selling their company, preparing for that possible future is never a bad idea. But before we get in to the six (and a half) tactics you should be doing now to sell your startup in the future, let me share a quick story …
Alan, the founder of a very successful gaming company, was sitting at his desk working on the company’s product strategy. Despite countless promises to himself that he’d turn off his email notifications when he’s going into Whitespace Time, he just couldn’t bring himself to do it.
He heard the email notification ping loudly and was immediately drawn to his inbox. To his surprise, Alan discovered that one of the biggest players in the market was interested in acquiring his company. Throughout the discussions that followed, Alan found out that the offer on the table was $200 million.
As a first-time entrepreneur, that number blew his mind, but he resisted the temptation to simply go for it. Instead, he picked up the phone and called one of his board members. They looked at the list of relationships they had built with high-value people in the companies most likely to acquire his startup.
Over the last five years, they cultivated these relationships to increase optionality if and when an acquisition were to take place. Because of this, when Alan reached out to his network he brought two more companies into the discussion. Within a week, Alan was able to sell the company for $400 million, doubling the value of his startup.
The learning is clear: Very few things can double the valuation of a company in a matter of days, and one of them is cultivating the right relationships.
As you might have guessed, Alan’s story is true; we just took the liberty of changing the names. Moreover, this story isn’t a one-off in Silicon Valley. Acquisitions happen fairly often, and it may happen to you. If you want the best deal possible, you’d better start preparing now.
If you think selling your company is even a remote possibility in the next 2, 3, 5, or even 10 years … Here are six (and a half) things you need to start doing today.
#1: Network with the Most Important People in Your Ecosystem
Although an IPO might be the most coveted exit, the most likely—and thus realistic—exit for most venture-backed startups is an acquisition.
And one of the best ways to prepare for this exit is to become an outward-facing CEO. You can accomplish this by building relationships with the most important people in your space.
But a common mistake here is going after the biggest fish in the pond. Even if you already have your top five target companies in mind, focus on meeting the most influential people in your ecosystem, not just the ones who work for those companies.
A side benefit of this is gaining access to intriguing market insights that can influence your company’s trajectory in a very positive way.
So identify the thought leaders in your industry that are likely to resonate with your approach, regardless of where they work. After all: Sometimes you don’t know who is influencing whom.
If these influential people have something positive to say about you, the chances of getting access to the right people at the companies that might acquire you goes up dramatically.
As you work to identify influencers, keep in mind that a thought leader is not always the loudest person in the room; just because they make their presence known does not mean they actually influence your space.
Focus on the people who leave an imprint on your ecosystem to the point where others turn to them for insight.
Mindmaven Pragmatics #1
Any time you meet someone who impresses you, ask who they are impressed by.
High-caliber people are often only impressed by those of similar caliber so, if you follow the bread crumbs long enough, you’ll usually find yourself connected with the right people.
Note: The reason this is tip #1 is because not only will it help you increase the likelihood of a successful acquisition, it’ll also increase the likelihood of really good things happening to your company. If you’re known by the best players in your industry, it’s often just a matter of time until something great happens.
#2: Network with Organizations You’re Interested In
Knowing your audience and where you fit in the market are the most important factors here. Many founders tend to aim for the corporate development team and, while that isn’t technically wrong, you don’t want to focus solely on them.
After all: Their job is to look at deals, but they’re rarely the ones to compel a company to make a deal.
Instead, focus on building relationships with the people in these organizations who have the ability to influence their CEO toward which companies align with theirs. For example: CPOs and VPs of Product.
That said: Don’t focus too much on titles, especially early in the relationship development process. Besides, it’s unlikely that you will meet with the CEO of Google right out of the gates.
At the end of the day, you’re looking for influence, not titles. Seek out people that you suspect have interesting expertise and are intrigued by the sector you’re addressing.
If you’re open to speaking with others in the organization, eventually they will lead you to the bigger fish that you’re going after. This can happen surprisingly fast if you hit the right nerve.
In the early stages, even these people might be too high up the chain, so don’t shy away from the folks who work for the influencers, like a Director of Product. Anybody with the potential to attract the attention of the decision makers is valuable early on.
If you come across as impressive, they will bring you up as someone to think about and talk to when they are trying to understand the dynamics of the market.
And finally: Be careful not to exclude companies without talking to someone to explore whether or not there’s potential for alignment. After all, you never know when a business is getting ready to launch a new initiative.
For example: If your startup has a truly innovative approach that is relevant to the broader scope of the company, very often these people will be interested in meeting you and building a relationship.
Mindmaven Pragmatics #2
To execute on this tip, take the following steps:
- Step one: Create a bullet-point list of companies (and relevant individuals within those companies) you feel are good targets for potential acquisition.
- Step two: Develop a storyline of why it makes sense to connect with people within the company. Note that this should be something more than, “I want them to acquire me.” For example:
- “I need your help with some market research,”
- “I’m looking for people who have expertise in this area for a potential future panel,” or
- “It looks like we’re operating in the same ecosystem and I wanted to see if it’d be worth exchanging some of our experiences.”
- Step three: Begin proactively pursuing these relationships with connection tools like LinkedIn or Accompany.
- Step four: Get the most out of your initial interactions with these contacts by leveraging the power of meeting debriefs and icebreaker sentences.
- Step five: Your list of contacts will organically grow as your business and network grow. I recommend using a tool like Contactually to organize your growing network into buckets.
#3: Start at the Right Time
If you believe building relationships isn’t just an avenue for selling your company, it’s never too early to start. Working with the right influencers is beneficial in so many other ways. For example: Talent acquisition, market insights, access to information, and ability to influence.
Many successful entrepreneurs would probably say that some of the best opportunities they’ve experienced have come from the people they know and trust; often that happens by serendipity striking. Here at Mindmaven, we call these moments “breakthrough opportunities,” and they create massive growth in your company.
It’s not easy for many newer CEOs to identify when they should begin developing relationships with potential acquirers. And while there isn’t necessarily one right answer, two potential triggers are when you switch into scaling mode, or begin hiring an executive team. If you hire well, some of your time gets freed up and this is a great opportunity to get in the habit of managing these relationships.
In our view one of the first hires you should make is an Engagement Manager, a role we invented to get startup CEO’s a lot more productivity through leverage and to support your efforts getting the most from your network.
Other potential triggers might be Series B closing, or a really big Series A closing.
If you don’t start managing your relationships early and you wait until the moment you’re ready to sell, you are likely to find yourself scrambling to have those initial conversations where you have to answer all the questions about what you do and how you fit in with them in one shot, as opposed to proving it to them over the course of a few years.
Mindmaven Pragmatics #3
I mentioned this above, but let me go into a little more detail: As CEO, one of the most important hires you can make is an Engagement Manager (EM).
An EM is a hybrid between an executive assistant and a chief of staff who has been specifically trained to save you time, increase your leverage, and boost the value you receive from your network.
To learn more about how EM can save you 10+ hours each week, click here.
#4: Make Relationship Development a Priority Before Selling Your Company by Being Programmatic
Once you’ve identified the right types of relationships to build, it’s crucial that you continue to develop them beyond that first meeting.
It’s almost like the President’s helicopter, Marine One. There’s always one helicopter constantly running, ready to whisk the President off at a moment’s notice.
In the same way, you want to be able to activate these relationships on demand and have the person not only know exactly who you are, but already respect you and have a narrative around how your product and company are relevant to them. That way, you can leverage them when you get your first real offer because that is when you’ll need them most.
This can be tough when you’re still focused on improving your metrics and shipping great product. Even though managing relationships with potential acquirers will only develop a sense of urgency when you’re actually selling your company, it is among the most important things you can do.
Therefore, you need other mechanisms to proactively drive these relationships instead of staying in your reactive day-to-day routine, because it is possibly the most attractive long-term bet you can make to impact the value of your firm.
In order to do this effectively, your relationships need to be programmatically managed so they are “warmed up” when you need them most. There are several tactics that you can deploy, but the simplest one is to ensure that you touch these people every 45-60 days in a way that they find relevant.
One of the easiest things you can do is use a tool like Contactually to remind you to follow up with these important contacts.
The most important rule here is to make sure you’re delivering value. With all of these relationships, we recommend that you aim to identify one or two themes of perspective on the market that you both believe in.
Consistently use those to provide new insights about the marketplace in the form of anecdotes, theories you’ve developed, data and trends, books, articles, and most importantly, making valuable introductions. The real power behind this approach is that it allows you to maintain an ongoing conversation that can go on for years.
Ultimately, you will win in three ways:
- You will build meaningful relationships through which you have demonstrated your value consistently over a long period of time.
- You’re establishing a reputation as someone who understands the market very well and you will probably be perceived as a highly-competent expert. This perception of quality is often also imparted to the company as a whole, which can prove invaluable at the right time.
- As you consistently demonstrate value, you’ll build a reputation as someone who follows through. As I’ve talked about before, this reputation can have a profound impact on your career.
Mindmaven Pragmatics #4:
One of the easiest ways to incorporate this tip is to leverage two of my favorite tools: Contactually and Accompany.
- Create a Contactually account and set up reminders so you’ll receive notifications when it’s been 45 days since your last interaction.
- Create an Accompany account so you’ll receive updates when any of your high-value contacts make the news.
- Use these tools in conjunction to deliver experiences that will be perceived as relevant, valuable, and meaningful to the most influential people in your network.
#5: Learn How to Tell Your Story in Such a Way That It Uniquely Relates to the Potential Acquirer
One common and highly-detrimental issue many startup CEOs face is that they know what their business does, but they don’t know how it relates to their ecosystem as a whole.
Here’s why that’s important: If you have a keystone meeting with a senior executive with the ability to encourage their company to acquire yours, you’ll be more successful if you have a proven narrative around why your company and product are uniquely designed to fit into their worldview.
While many roads lead to Rome (or acquisition), here are three steps that can help get you there:
Step 1: Understand Your Story
Be very confident in your own story and how it plays out in your general space. You have to put thought into this so you believe what you are pitching.
As a startup, this is important because in most cases, you are testing new hypotheses about the market that the companies you’re talking to may not have the freedom to test in the way you do. Very often, you’re gaining unique insight into the marketplace that they simply can’t get.
Because of that, it is likely that you become very valuable to them. It will be easier for them to start believing in you if you exude confidence in your insights. If you can achieve this, they will want to keep you close to track your development.
Step 2: Understand Their Worldview
Once you know your story and how you will be a successful fit in the marketplace, you must also learn about the potential acquirer’s views on your space.
When it comes to educating yourself, always consider who the other players in the ecosystem are, what the trends are in the market, and what your potential acquirers are looking for. This is where gaining early access to influencers within the organization comes in handy.
You will learn how their company thinks based on how they articulate their ideas about the market, which enables you to see new ways in which you are aligned. They will often subconsciously educate you on why your company would make a ton of sense for them.
Your goal should always be to have your first hypothesis on how your company aligns with the potential acquiring company before you have any of those keystone meetings. In many cases, that first meeting will actually help you polish your story as you learn more.
Step 3: Craft a Unique Story that Resonates with the Company
Combine those two steps into a story that resonates with the individual company you’re talking to. You can go out and test your story out with some of the contacts from the organization that you’ve met along the way.
Don’t be afraid to ask for feedback so you can make improvements and better understand the potential acquirer’s needs in the light of your startup. Now you are really whetting their appetite.
#6: Its OK to Work with Multiple Companies (as Long as Your Narrative Is Genuine)
The most important piece here is not to shy away from having these kinds of conversations with multiple companies. If you have four companies you’re targeting, you may have four unique stories as to why you would be a great acquisition for each one. The narrative will be different from one case to the next.
This won’t be disingenuous as long as you put a significant amount of effort into learning how these acquiring companies see the world. This allows you to position your startup in such a way that it is uniquely relevant for each individual company. You’re simply offering a narrative on how your company is tailored to fit nicely into each prospective acquirer.
Be wary of focusing too much on the company you’re most enamored with. The danger here is that you’re putting all of your eggs in the one basket you like most. By doing this, it’s less likely that your effort will ever result in creating a situation that can have the kind of impact on the value of your company that we saw in Alan’s story.
#6.5: Focus on product, not acquisition
While this entire article was about selling your company, there’s something you must never forget: You probably started your business because you wanted to build something great.
While it’s important to build these acquisition-focused relationships and prepare for a potential exit, your primary concern needs to remain on building a great company with an exceptional product.
At the start, most of the responsibility for building a great product falls on you. But the sooner you can make the transition from operations to delegation—the sooner you can surround yourself with people you trust to build a create product for you—the sooner you’ll be able to invest more of your time and energy into the strategies outlined in this article.
To help you reach that point in your career, we’ve compiled a list of some of our best articles around time management and leadership. Use them as a jumping-point to get started:
- Whitespace Time Management: The Proactive Entrepreneur’s Guide to Owning Your Time and Mastering Your Priorities
- Counter-Intuitive Leadership: The #1 Obstacle to Your Teams’ Success (Might be You)
- How to Become a Legendary Leader (in Just 5 Minutes a Day)
And remember: These tips, tricks, and strategies in this post are going to be immensely valuable to you no matter what exit you pursue. They’re going to be valuable even if you decide not to exit at all. Because at the end of the day, they’re going to give you strong relationships with industry influencers; and that can only lead to great things.