I’ve added this post so I could put a link to this chapter from my last book into my new book: Masters of Corporate Venture Capital, which should be available any day now.
Please download a free copy of chapter 8 “Which Way to the Exit?” from my book – THE ENTREPRENEURIAL BIBLE TO VENTURE CAPITAL: Inside Secrets from the Leaders in the Startup Game (McGraw Hill 2013 hardcover & all e-book formats)
Again, download this chapter HERE.
Contributors to this chapter include:
• Gary Johnson, director of corporate development, Facebook
• Jackie Reses, executive vice president of people and development at Yahoo! (interestingly in charge of both M&A and HR)
• Parag Patel, Vice-President of Worldwide Sales, Software-Defined Storage at VMware formally VP of global strategic alliances at VMware
• Dave Berkus, author and business angel
• Nic Brisbourne, partner at Forward Ventures, former partner at DFJ-Esprit
• Russ Fradin, CEO and cofounder of Dynamic Signal and former CEO and cofounder of Adify sold for $300m
• Antoine Papiernik, partner at Sofinnova Partners
• Benjamin D. Kern, partner at McGuireWoods
• Additional contributions from directors of corporate development from some of the most acquisitive companies in Silicon Valley
I’ll start you off here with my opening to the chapter:
“I made most of my money selling too early.” – J.P. Morgan
Merger and acquisition (M&A) is the most likely positive outcome for most angel- or VC-backed technology startups and therefore worth understanding from the first moment you begin to conceive your new venture or as you move along the journey to exit. For acquirers M&A is about a lot of things. Is a dollar spent on acquisitive growth better than a dollar spent on organic growth? M&A is about revenue growth, innovation, augmenting the DNA of your employees and core leadership team, lowering attrition, and increasing the “coolness” of your company to appeal to new recruits. M&A is about confidence within a company, confidence in the macroeconomic environment, defense, economies of scale. M&A is about animal instincts…”
[a bit later in the chapter…]
“Big balance sheet buyers acquire companies for different reasons. There is a hierarchy in how much they value your company: revenue multiples, profit, IP, or employees. Understand the buyer’s hierarchy and position your company to move from one category to another to increase what the buyer is willing to pay for your company. Here are the most common buyer’s hierarchies:
1. Team hire (“acqui-hire”)
2. Team buy
3. Technology buy
4. Business asset
5. Strategic asset”
Download full chapter HERE.