OWNER'S MANUAL

From Founder to Employee: The Surprisingly Smooth Post-Acquisition Transition

Two successful founders discuss the transition from entrepreneur to employee --and how the transition is a lot smoother than you might think.
Advertisement

Many startups die on the vine. A number become thriving businesses. A few go public.

Some (even after a successful IPO) are acquired by other companies and their founders stay on to help continue what they started.

That is the case for two entrepreneurs: Michael Lazerow, the founder of BuddyMedia, and Marcel LeBrun, the founder of Radian6; both companies were acquired by Salesforce and are now part of its Marketing Cloud.

I talked to Michael and Marcel about the journey from startup to acquisition and beyond.

When you considered various exit strategies, was an acquisition part of the mix?

Michael: No entrepreneur goes in with the exit in mind. Instead you have an idea, you love it, it makes it out of the gate, and you put your head down and build a business.

BuddyMedia was my fourth business and a culmination of many things I'd done over the years. I was excited about social networking and we felt the opening of the Facebook platform would be incredibly powerful for businesses.

It was a wild ride. My wife and I went from zero employees to hundreds in five years and helped invent social media marketing. We were one of the fastest growing software companies, we raised $90 million, we bought a company, and a number of companies decided they really wanted to own a company in our space. Eventually we decided Salesforce would be best for our team.

But that was never the plan.

So how do you decide it's time to sell? Even considering your responsibility to investors, etc., it still has to be tough.

Marcel: You think of it differently depending on where you are in your company's journey.

Any kind of transition is just a means to an end. You have to ask yourself if this transaction--in spite of the fact it's tempting for your shareholders--is a smart step to where you're going.

As a management team you think hard about cultural compatibility and fit. When we started talking to Salesforce we already had a relationship, but we worked hard to determine what it would be like to be part of their culture. Salesforce is a "yes" culture: focused on growth, focused on growing faster, doing more, being innovative, and that was so much more aligned with who we were than, say, Microsoft or Oracle.

Cultural fit was a huge factor for us.

Michael: From initial discussion to signing took just a few weeks; we closed two months later.

When it feels right it feels right. In our case we were comfortable with independence and had money in the bank. It wasn't a deal we had to do, but as I told my board and team, we were trading our current investors and board for Marc Benioff and Salesforce. We were still doing what we wanted to do, and doing it with our team.

Marcel: What is your vision? What do you want to do with your business?

If you're on track, do you see yourself as able to build and execute on that vision... and does that partner help you accelerate your plans? Or is it too early?

If things are going well and you're on plan and your product is a market unto itself as opposed to a feature, then go as far as you can and grow your business. I'm a fan of building a real business before selling as opposed to building a tech tuck-in that doesn't actually build a product. More often than not those companies just get lost in the larger business once acquired.

When you're a going concern, the acquirer doesn't want to screw up what's you're doing. They will help you execute as opposed to folding you in.

How do you make those first few months work?

Marcel: I had done an IPO in 2000. The key to the transition--whether from startup to IPO or acquisition or even landing investors--is ensuring you reach that point with fresh legs. Many companies cross that line with nothing left in the tank.

Exits are part of building a great business. When you take venture money your shareholders will want an exit, but if you structure everything around your exit you will struggle.

Ultimately you want to build a great business. And the acquiring company wants to acquire a great business. See an acquisition not as an ending but as the beginning of a new phase.

What advice would you give to entrepreneurs who are looking for the right partner?

Michael: Get to know your acquirers early. Although we didn't take long to make the deal we had been a customer, we knew their team, they knew our team and culture... Build personal relationships. Business is all about personal relationships. If you have relationships with potential acquirers you'll know a lot about them before you even start discussing an acquisition.

And if you partner with the right company you won't feel you've lost that entrepreneurial feel. Other entrepreneurs whose companies were acquired by Salesforce are helping to lead us forward. The heads of different teams are entrepreneurs.  We're a business run by entrepreneurs. If that is important to you, take time to see how other acquisitions turned out--that will tell you a lot about the culture you're joining, and whether it's right for you, your team, and your customers.

IMAGE: Sayantan Chaudhuri / Flickr.com
Last updated: May 14, 2014

JEFF HADEN | Columnist

Jeff Haden learned much of what he knows about business and technology as he worked his way up in the manufacturing industry. Everything else he picks up from ghostwriting books for some of the smartest leaders he knows in business.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: