When It Makes Sense to Sell Your Company Early
In 2007 I started a company called Tikatok.com, an online self-publishing platform for children. Just 22 months later, I had the opportunity to sell my company to Barnes & Noble, and was suddenly faced with a big decision. Do we remain a start-up and keep building the business on our own, or do we become part of a larger, established company right away?
I wasn’t planning to sell my company this early. The opportunity just presented itself and after much thought, I decided to take it.
Why did I say yes? I was well aware that a big part of entrepreneurship is indeed the exit. You either sell the company after years and years of building it, or try for an IPO. But after thinking about the Barnes & Noble possibility, I realized there is a third option: Build your company under the aegis of a large parent company that has resources you couldn’t acquire on your own.
So when is this a good deal? Make sure your potential buyer has:
1) An already-established significant customer base that could potentially buy your product
Barnes & Noble has over 700 stores and reaches 70 million customers. As part of Barnes & Noble, we get exposure to all those customers. And they’re the same types of parenting customers we were already targeting.
2) A marketing machine and platform that you wouldn’t be able to afford
Let’s face the reality. Big companies have big marketing budgets, and small companies have small marketing budgets. If you play it smart, you can integrate your product as part of the overall marketing campaigns of the parent company. For example, over the summer Barnes and Noble had a large NOOK color reader tablet campaign, and we participated in the campaign too. We developed a Tikatok app for the NOOK platform, and ran a contest on our Web site that we promoted in all Barnes & Noble stores.
3) Your buyer will push you to think BIG!
As a startup, sometimes all we wanted to do is finish out the month successfully. We just didn’t have the bandwidth to focus on the big picture every day. Like other entrepreneurs, we got caught up in issues like, “Can I pay salaries by the end of the month? Should I release this product now or wait until we add more features?” Guess what-- big companies don’t think like that. Their big question is “Can you create a multi-billion dollar business?”
A big company can challenge you to think in the same way. Are you building a product that will make an impact on millions of people? Small products marketed to small volumes is just not interesting to big companies.
The challenge to think big has really helped us. Barnes & Noble challenges us every day to take our vision and our ideas and make them bigger than big.
While many entrepreneurs resist the idea of selling their firm too quickly, there’s something to be said for the bandwidth, budget, brand recognition and manpower that a larger business can provide. And if you pick the right partner, you’ll still be able to think creatively, innovate, and develop your own ideas.