I'm lucky. I founded and ran a successful software company for 14 years, then exited. I sold VerticalResponse to a public company where all of my investors got close to 10x their investment. Great for them, and I have to hand it to them, they were VERY patient!.
Believe me, It wasn't all glory. 14 years is a long time, especially in software land. I had a ton of ups and downs, probably more downs than ups. But I always knew that hard work and perseverance would pay off. And as long as we had cash in the bank I knew I could manage a way to make the business to grow.
So, one day out of the blue got this amazing offer to buy my company. Too good to be true? Maybe. But it was so good I called my friends and family. "5 times revenue, 5 times revenue!!! We're selling!" I was shouting. The offer was north of $70 million. So all of investors, all 'friends and family' would do well, and I could retire for good (can we really?). Nah, but I could "choose not to work."
That morning the exec team went out on the town. We opened up bars in the 'hood to serve us champagne at 10am. It was unreal that this was happening to a scrappy bunch of people that didn't raise a big round of VC money.
A few weeks later, I got on a plane. I flew to where my new HQ would be and met with the CEO and COO of the large public company and couldn't have been happier. We talked about how we would manage our teams and how we would deal with a bi-coastal integration. It was great.
Then it happened, that unfortunate day in 2008,
I vividly remember being in the back seat of a limo with the M&A guys who were doing my deal. We were driving to my would-be new HQ. They talked about Lehman Brothers shutting their doors and what this crisis would do to the markets.
And it dawned on me. The shiny, pretty piece of paper with the words "Letter of Intent" on it would soon evaporate.
So I headed into my would-be HQ knowing, it would probably be my last time there. And, it was.
It certainly trained me for the future, and in that future I had dozens more acquisition conversations and got many offers to buy my company, although never one as good as that one. It taught me to not be myopic and to always know my surroundings and my outlook on larger more macro issues.
It Ain't Over Till It's Over
Anything can happen in life that you just can't control or anticipate. Your M&A contacts could get fired or leave, the board could reject the offer, the economy can crumble. In one of our dozens of discussions we even had the lead at the acquiring company tragically pass away. You don't have a deal until the deal is done. "Letter of Intent" means just that, not "Letter of the-deal-is-done."
Watch The Financial Markets
How is your overall industry doing in the market, do you need to branch out and widen your market with new products or services targeted to them? You need to really keep a keen eye on what's going on from a micro perspective in your own industry as well as a macro perspective on how the overall market is treating companies like yours. Then act accordingly.
Set Team Expectations
Don't get too excited too soon. If you've got your team toasting at 10 am like I did, and then your all-too-awesome deal gets pulled out of the palms of your hands, you've got some rallying to do. Avoid that--it's a real buzz kill. Set expectations that this is a 'potential' once-in-a-lifetime deal and there are many variables that can get in the way of the deal coming to closure.
Now I'm at my 3rd startup, Dasheroo, I'm in a very different place. But even with over 20 years of tech startup experience we're always learning. At least with this one, I've got some real experience under my belt. Since we just launched 6 months ago, it may be too early for an acquisition offer, but when that time comes, those horror stories of the past will certainly help us navigate those waters.
Hopefully you don't have a horror story like this one, but if you do, please share--we'll all learn from each other.