Positioning your start-up for acquisition
Most start-ups don’t make enough money to continue to be self-sufficient, the trick has always been to keep raising money to grow till someone who needs the customer base, patent or whatever the start-up has to offer comes along and acquires it. The other tactic is to IPO and cash out but that can be very tricky especially if you are not a B2C firm with huge popularity and buzz, the public may not be conversant enough with your product to invest in it, especially of you are a start-up in sub-Saharan Africa.
If being acquired is your best option then you might want to position your start-up for a possible acquisition by ticking all or at least most of the boxes lists below
Your people; Acquihiring is a very popular company acquisition strategy for established firms, the tactic involves buying over a company to acquire its people. This is a great time to give your employees stock options and have them vest it if you already haven’t because the other option for your competitor is to poach your people and have them replicate your advantage. You should also hire people that have good education pedigree, excellent work experience with highly respected firms and have worked on projects that put them at the top in their field. No one will acquihire you if your people don’t have excellent pedigrees, the ‘we don’t look at credentials thingy’ is a media gimmick .
Product innovation; An excellent start-up idea in Africa is to download the top open source product in a category you are comfortable with, skin it to make it look good and sell it as software as a service, No serious additional code, just beautification of the front end by one front end engineer and one front end designer. No one will buy you out if that’s your tactic because you really have nothing to sell, no patent, no serious backend improvement nothing just the open source codebase and some skinning. All hope is not lost if you tick some other boxes though but if this is your only advantage then you might want to hire some backend engineers to make it a lot more personalised based on customer feedback.
Blue sky; This can work for or against you, your company might be bought to acquire you the founder but that will mean that you would have to be so good you can’t be ignored, this can work against you if you intend to exit the business because the terms will clearly read that you have to stay on for some time, if the entire business is somewhat dependent on you, then you don’t really have a start-up because people don’t really scale and investors don’t like to bet solely on people. The solution to blue sky is to remove yourself gradually from the business and have it run independent of you while improving the other boxes of your people and product innovation.
Traction; This is probably the most important reason why anyone will want to acquire your start-up, having a sizeable market share or a huge customer base is the first box you need to tick if you want to position your start-up for acquisition, one might even argue that it is the only one you need. Traction does not equate profitability or even revenue especially if you have a B2C start-up, just show you have 10 million users a week and the cheques might start to roll in, for B2B products having repeat customers and a fair market share that has not become static will do just fine.
Value innovation; Forgive my consultees, this simply means that you have created a new market out of the existing one, all of a sudden we all cannot live without search even though we were fine with the internet for more than 10 years without it. Value innovation is different from product innovation in that it is less of patent or intellectual property tactic, it is more like producing milk in smaller sachets and selling to the developed world, you can’t really patent that but you can acquire a whole new market of low earners. If your start-up has been successful with such a strategy, you might be a good candidate for acquisition.
Did I leave anything out?, please tell me in the comment section