In 2007, Lane Becker cofounded an online customer-service startup, Get Satisfaction. In 2011, after turning down acquisition interest, the company raised $10 million at a $50 million valuation, bringing its total amount raised to just under $21 million.
Last week, Get Satisfaction was acquired by a social-media management company, Sprinklr, for an undisclosed amount.
You'd think the cofounder of a $50 million startup would be celebrating the sale. But Becker isn't.
In fact, right after Becker signed the acquisition paperwork, he vomited.
That's because Get Satisfaction, the company Becker says he was pushed out of in 2010, was sold to Sprinklr in a "fire sale." A fire sale in the startup world is when a company is in a desperate state and needs to immediately find a buyer or shut down. Becker says he and Get Satisfaction's early investors didn't make a penny from the Sprinklr deal, though the company's current CEO, CFO, and later-stage investors did just fine.
Worse, Becker says he wasn't even told an acquisition was in the works. A former employee loyal to Becker leaked him the information, and Becker hired a lawyer to learn what Sprinklr and Get Satisfaction were up to.
So, how does the founder of a $50 million company find himself powerless and penniless during an acquisition?
Becker tells Business Insider he and is team made two big mistakes:
- They lost control of their business to venture capitalists
- They weren't honest enough with themselves about where their business was in the marketplace before raising a big round of financing at a lofty valuation
Becker says he and his cofounders started losing control of the company when they raised a $6 million Series A round. But the $10 million round Get Satisfaction raised was what really did them in.
"We took a $10 million investment very prematurely," Becker told Business Insider during a phone call Monday. "At the time we were entertaining some acquisition offers. In hindsight, they would have been wise acquisition offers to take. The executive team got stars in their eyes about the money and took the investment. When you raise $10 million at a $50 million valuation, that is a serious promise you're making with your business."
Becker says he didn't tweet about his disappointing acquisition because he was bitter. Instead, he wanted to be honest with the startup community.
"I understand venture capital is a game and we lost," Becker told Business Insider. "Although I admit I thought it was more a game of chess and it's more a 'Game of Thrones.'"
Becker doesn't fault all his investors for Get Satisfaction's outcome. He says his early-stage investors, including O'Reilly AlphaTech, Kapor, and First Round Capital, were "fantastic" and that "the business would not have existed without them."
Here's Becker's very honest Twitter rant about what startup acquisitions can really be like for founders. Sprinklr CEO Ragy Thomas did not immediately return a request for comment.