What you should know about being acquired
Having sold two companies—our first company was acquired by Oracle, and our second by Dropbox—my first piece of advice to people asking about getting acquired is usually, “Don’t sell.”
I’m mostly kidding, but it’s important to realize that while getting acquired sounds like success, it isn’t always a rosy story.
In particular, it can sometimes be… kinda crappy. You might not actually make any money in the deal. You might end up at a rough place to work. Or even if you do get a good payout and end up somewhere great, it can still be a hard transition.
When you sell your company, you lose control of the thing you built. You go from being the founder to being just another employee, and that transition is inevitably a tough one.
If you’re thinking about selling your company, here’s what you should do to increase your chances of happiness:
Focus on fit
This may sound counterintuitive, but if you focus on fit rather than price tag you may end up happier and with more money in the long run.
In general, when your company is acquired, your acquirer wants to retain you and your cofounders, and so the deals are generally structured as some money up front and then mostly a significant amount of cash or stock that vests over a number of years.
If you’re evaluating Company A vs. Company B, and Company A’s offer is 20% higher than Company B’s, many people will just automatically pick Company A. But Company A might be a very different place to work than Company B.
Let’s assume that Company A is big and stodgy—and so, realistically, you only stay for a year before you quit. By contrast, you might stay three years at smaller, nimbler Company B because you’d be happier there. Counterintuitively, you’d make much more money having gone to Company B, even though their offer was lower—because you were willing to stick around to capture more of it.
(You’d be surprised at the extent to which “But they’re paying me $X” is not enough motivation to keep you somewhere when you don’t enjoy the job.)
The best way to figure out if a company is a good fit for you and your team is to approach it the same way you would any other job search, because that is what it actually is—you are going to work at that company.
So ask: is this a place you actually want to work? Will you have the opportunity to learn and grow there? Will you like working with the team? Will you have impact?
Do right by your team
As a founder, you also need to ensure things turn out well for your team. They signed onto your journey and you have an obligation to do right by them.
Their fate should be included in your calculus: Will you be able to bring everyone with you? Will they be treated generously and fairly? Will you all stay together or will they be assigned to separate projects?
When our first company was acquired by Oracle, we were very clear that everyone had to come over together. Yet when the final offer letters came through, one was missing. They didn’t want our sales rep. We ended up giving the rep an extremely generous bonus to make up for that fact, even though it came entirely out of our payout from the deal—because it was the right thing to do.
Accept that you’re giving up control
When a company wants to buy your company, they either want your tech, your talent, your customers, or your entire business. At Oracle they wanted our tech, and at Dropbox they wanted our talent.
Sometimes it’s not clear what the answer is, and the fate of your product at the acquiring company is always a bit of a mystery. Yes, they might do something interesting with it—but they also might just throw it away.
You have to be at peace with that possibility—or you will be miserable.
When you sell your company, you’re giving up control. If you’re not okay with that, you shouldn’t sell.
To sum it up, it’s easy to get excited and overly focus on the potential dollar value of a transaction when you’re considering selling your company. In reality, your post-acquisition quality-of-life will be nearly entirely dictated by things that have nothing to do with the purchase price, so take your time and choose wisely.
And if you have an offer in front of you someday and want to talk it out, drop me a note.