How to Startup: Mission Acquisition

How to Startup: Mission Acquisition

Numbers don’t lie, but often they don’t tell the whole story. If you look at the facts and figures alone, launching a startup seems like a daunting enterprise. It seems like a miracle anyone makes it out the other side.

  • 90% of startups around the world fail.
  • On average, it takes startups 2-3 years to turn a profit. (Venture funded startups take far longer.)
  • Post-seed round, fewer than 10% of startups go on to successfully raise a Series A investment.
  • Less than 1% of startups go public.
  • A startup only has a .00006% chance of becoming a unicorn.

Ouch.


If your goal is to reach billion-dollar valuation and be publicly traded, the odds will never be in your favor. It does happen, of course, but it’s an exceedingly rare outcome for even the best startups. Holding on too tightly to that hypothetical can actually work against you, blinding you to the importance of planning for a different kind of exit.

It’s been said before, but it bears repeating—companies are bought, not sold. Better exits happen when someone sees the value your startup can bring to their business and is actively trying to purchase it, rather than you having to convince prospective buyers of what your services or products can bring to the table. In the latter scenario, your footing is much less secure and your odds of a successful transaction are inherently lower. You have much more power and are in a much better position when buyers are actively pursuing you.

Getting acquired may not feel like the fairy tale ending your startup deserves, but it’s more than just a back up plan—and it doesn’t happen by accident. Beginning to build the infrastructure today can give you much more control of what happens to your company in the future.

Here’s my advice to startup founders who want to be savvy about their acquisition strategy:

  1. Make a Buyer List: If your startup has successfully reached Series A or B funding, it’s time to put pen to paper and make a list of your top potential acquirers. Doing so does not indicate failure, just prudence. Who is in your space and could benefit from your company? What company would you like to be a part of? Who shares your mission? Questions like these can help guide you. Aim for having between 10 and 25 potential acquirers in mind.

  2. Make Connections: Now that you have your short list of companies, be intentional about reaching out and forging relationships with their leadership team. Shoot for the top—a CEO-level contact is ideal. Also consider speaking with people at Corporate Development, but don’t forget another key area of focus—the operating level.

    Say, for example, you’re a rental software startup that serves the multifamily sector. Zillow would be a natural fit for your M&A list. Instead of just going after the Corp Dev contact, get to know the person at Zillow who runs the rental business. M&A deals need executive sponsors from the operating unit. Understanding what they do and how they do it is a big advantage when envisioning how your start up can fit into their ecosystem.

  3. Make Those Connections Count: After you’ve connected with the right people at your potential acquirers, make sure you keep them in the loop. Every quarter or six months, reach out to them directly to keep them apprised of what’s going on in your business areas. Tell them what you’re working on. Share your big wins. Ask about potential business development partnerships. See how you might be able to sync up and compare notes.

If you go into these conversations in the name of collegial collaboration, you can form meaningful business relationships that can lead to the best possible outcome for both parties: your startup getting acquired and their company gaining new value.

We acquired 16 companies during my decade as CEO of Zillow. I estimate that the median length of time from the first time I met each of those 16 founders to when the acquisitions were completed was three years. It takes a long time to build relationships with strategic acquirers. Get started now.

https://twitter.com/spencerrascoff
https://www.linkedin.com/in/spencerrascoff/
admin@dot.la
LA Venture Podcast: Gil Demeter of Pontifax AgTech on the Next Generation of Robotics and Bioscience
Photo by Jan Kopřiva on Unsplash

On this week's episode of LA Venture, hear from Gil Demeter, the vice president at Pontifax AgTech. We had a great discussion about next generation robotics and bioscience. Pontifax AgTech has over $465 million in assets under management, and is one of the largest food and agtech funds in the world.

Read moreShow less
Minnie Ingersoll
Minnie Ingersoll is a partner at TenOneTen and host of the LA Venture podcast. Prior to TenOneTen, Minnie was the COO and co-founder of $100M+ Shift.com, an online marketplace for used cars. Minnie started her career as an early product manager at Google. Minnie studied Computer Science at Stanford and has an MBA from HBS. She recently moved back to L.A. after 20+ years in the Bay Area and is excited to be a part of the growing tech ecosystem of Southern California. In her space time, Minnie surfs baby waves and raises baby people.
Here's How To Get a Digital License Plate In California

Thanks to a new bill passed on October 5, California drivers now have the choice to chuck their traditional metal license plates and replace them with digital ones.

The plates are referred to as “Rplate” and were developed by Sacramento-based Reviver. A news release on Reviver’s website that accompanied the bill’s passage states that there are “two device options enabling vehicle owners to connect their vehicle with a suite of services including in-app registration renewal, visual personalization, vehicle location services and security features such as easily reporting a vehicle as stolen.”

Read moreShow less
Steve Huff
Steve Huff is an Editor and Reporter at dot.LA. Steve was previously managing editor for The Metaverse Post and before that deputy digital editor for Maxim magazine. He has written for Inside Hook, Observer and New York Mag. Steve is the author of two official tie-ins books for AMC’s hit “Breaking Bad” prequel, “Better Call Saul.” He’s also a classically-trained tenor and has performed with opera companies and orchestras all over the Eastern U.S. He lives in the greater Boston metro area with his wife, educator Dr. Dana Huff.
steve@dot.la
RELATEDTRENDING
LA TECH JOBS
interchangeLA