How to Make Sure the Next Startup you Work for Gets Acquired
Before we get into this topic, I recommend that you consider all your goals when looking for a new job. See my other post "What Are Your Top Priorities When Considering a New Job?" for that discussion
First of all, what about finding a company that’s going to IPO? Statistics show that is a pretty rare and difficult event, even in this hot IPO market. So assuming getting acquired at some point is also a good exit for a company, employees and shareholders, let’s proceed.
Who are the most acquisitive companies? CBInsights published this article and graphic back in Sept 2014.
The market for anything AI and ML, and technologies that ensure better data management for such initiatives is even hotter. See The Race For AI: Google, Baidu, Intel, Apple In A Rush To Grab Artificial Intelligence Startups
For those lucky enough to be acquired, you know the drill. Typically, the fiscal result for the shareholders and employees of the company is good, unless it's a fire sale and the company has run out of cash. However, often with any acquisition it shouldn’t be forgotten that some do end up losing their job due to the acquiring company consolidating positions and roles in the combined company.
Lots of companies actually do fail. Google the words "Why Tech Startups Fail" and you’ll find no shortage of articles on the topic. To take a more positive view, this article focuses on being a mini guide to what you should look for in order to make sure that you are on the acquired side of that equation, which hopefully equals success.
I've been fortunate enough to have every company I have worked for since 1997 be acquired (some more than once since I left) or IPOed.
I’m sure many of you reading this blog post may have had similar experiences if you, as the Knight said to Indiana Jones in the Last Crusade, “Chose Wisely”. Some of it of course is pure luck, and finding a lifestyle changing event like those employees at Instagram, WhatsApp, and other very profitable acquisition and exits, is always a long shot. But while you may not be fortunate enough to hit a home run and retire, following a few simple steps might help you find an opportunity that can be both personally and financially rewarding.
Will you be allowed to make a difference?
I believe self confidence, ability and passion pays an important role. I have been lucky to have been in the product management and product marketing leadership function for all my prior companies. My objective has therefore always been to make any company I work for the leader in their respective markets. If you are not in marketing or product management, remember you are joining a startup! Any good startup should afford you the chance to be an integral part of contributing to the company’s strategy. Or to influence internal culture to motivate and galvanize everyone to work for the common goal, and to strive for greatness. The main message here is that the environment must be conducive so you can make a difference! Now that I have you a little fired up, let’s examine the business aspects of the company you may be considering …
Think Like a Product Manager (PM) or Investor
I have been a PM for the last 20+ years and have always taken ample time to review any company I am interested in via detailed research and analysis. This includes, but is not limited to, evaluating the potential market, assessing the technology, seeing the potential of the solution, thinking about the value proposition, determining the competition and evaluating the people who I’ll be working with, particularly that of the leadership team. All of this prior to the first interview. This serves a dual purpose. Firstly you should know as much about the company as possible and decide for yourself if you even want this job if offered in the first place. Secondly, it will help you be well prepared during the interview process. Particularly if you are interviewing for a PM position. It’s surprising how many product managers I’ve interviewed over the years who don’t really have a good answer to the question “Why do you want to work here?” And worse don’t know the fundamentals of the company they are interviewing with. How could they expect the company to hire them as a PM and entrust them with an important revenue generating product line, if they can’t assess the market themselves for what should be a very important decision for their own personal benefit and the next step in their careers?
There’s an old adage that points out that people spend more time evaluating their purchase of a $1,000 TV, comparing prices, looking at reviews and features than they do a $5,000 purchase of a stock. In some cases this could be said about those looking at a new job in that when looking for work, many interview first and assess later.
I’m not saying that everyone always gets a choice, particularly in difficult times when many good people are out of work. My point is that if you have the opportunity, there are a few key things to look for, and you must do your homework first; the by-product of which might just mean that you’ll do better at your interview.
If you are a practicing product manager this should be 101 for you. But if you’re not a PM, I’ll boil it down to a few key questions that are worth asking, or at the very least you should assess for yourself:
- Is the company backed by VCs with a good track record? – By this I don’t mean just top tier Venture Capitalists (VCs). There are plenty of smaller VCs who have been successful, just as there have been failures by portfolio companies of brand named VCs. Don’t think of VCs as just enormously wealthy and lucky individuals reaping vast profits, in times when VC money is hard to come by, the best ones are very thorough. It's likely that any company has had to go through a detailed review in order to raise the capital it has today. If times are booming, you should be a little more suspect because historically there are always times (think dotcom boom) when corners get cut. You may think that if you’ve evaluated the VC’s and that’s enough, due to the implied work they will have put into assessing the company before investing. This may be true, but you owe it to yourself to play VC or PM and to evaluate if you personally would invest in this company, let alone trust your career to it. So understanding the “financial mechanics”, e.g. how much is invested? How many shares? How has the invested money been spent? What is the stomach for the current investors to ante up more money if the company experiences a lean quarter (or two)? are all important things to know.
- Does the company have runway? - Meaning if the company is not profitable. What is the time frame based on current course and speed and plans before the company stops spending more that it receives? If the company just raised money, this is not a required question vs. if say the funding was 12 months ago. We all know how companies are able to blow through capital very rapidly, particularly if you look around and there are lots of freebies like lunches, nice offices etc. This might be ok if the company is hauling in customers and revenue at a steady clip. But for a company in startup mode, cost control is a good thing. understanding the “financial mechanics”. how much is invested? How many shares? How has the invested money been spent? What is the stomach for the current investors to ante up more money if the company experiences a lean quarter (or two)?
- Does the company you are joining have defensible IP (intellectual property) and strong technology? - Without this it may still be possible to be successful, such as a social networking or eCommerce site where first mover, brand or visitor acquisition is a telling metric. But if you are looking at software for example, the IP is the “value” of the company, especially early on when there are few or no customers. While a potential acquirer will value revenue, customers and profitability, in reality companies such as Oracle, Informatica and others buy for innovative technology which they can’t cultivate themselves. Google and salesforce.com often buy back companies from ex-employees who have left to innovate.
- What is the experience level and track record of the executive team and other leaders? - Has the CEO been successful in the past, even if this is his/her first CEO gig? As they say “previous performance is no indicator of future performance”, but experience plays a major role in navigating the turbulence that is inevitably ahead. What about the other team leaders? I say other leaders because the heart and soul is often at the director level of a company. But collectively it takes all the moving parts to contribute for maximum success.
- Do the leaders of the company get along? - This one is hard to gauge, but in my mind it is an often overlooked but critical point because team chemistry and absence of politics immediately double … Errr no, triple the chances of success IMHO. The attitude of each departmental leader within an organization has a profound impact on those who work for them. The more joint alignment and focus on the goals of the company, the better the chances of success. Case in point, the alignment between sales and marketing.
- Is this a growing or large market? - There is so much information on the web these days that even if you don’t have subscriptions to Gartner or Forrester reports, there are so many bloggers out there voicing their opinions that you can’t help but trip over information that will point you to the potential of your company-to-be.
- Does the company have a long term vision while being focused in the short term? – Having a concrete idea of where the company wants to end up beyond “we want to be the next salesforce.com” is important. I look for leadership who sees opportunity and potential everywhere but is measured in their focus and approach. As David Packard of HP fame once said “more companies die of indigestion than starvation”. It’s great that your product opportunity is like a buffet but it requires self control to not give yourself a heart attack in the process. Attempting to do more than a company can realistically accomplish with given resources is a different type of receipe for disaster and often the hardest one to own up to.
- Who is the competition? - You find this out the same way you do looking at the potential of the market. Unless you are joining some secret stealth company that’s invented something hither to unseen. There is always competition, even if that competition is that there is currently a less efficient way of doing what your prospective company-to-join is trying to improve on.
- What is the value proposition? – So you’re not a PM, but you can and should ask, is it faster? better? cheaper? Preferably the answer to all 3 questions is yes and better relative to the competition you uncovered in question 8. Has the value been proven out by existing customers? Not that you can find that out easily because it’s hard for a company to get their customers to talk in public. But at the very least, you should be able to get internal anecdotes from employees about the successes of any customers to date.
- How true is all that you’ve been told really? – The ideal scenario is that you’re being brought in by someone you know and trust who is already at the company. But failing that, use LinkedIn now and often, and avenues like Glassdoor (great resource to understand current company culture and interview process). This can be ironic since you know the company will be looking at your Linkedin profile during the interview process. So go ahead, find connections of connections and evaluate the profiles, recommendations and credibility of the team you’ll be working with. If smart people with good judgement are already at the company, your chances of success are much higher. This is even more important if you can’t or don’t feel that you are in a position to ask those questions during your interview process. Perhaps your role isn’t as key to which you won’t be privy to that information. But hey it’s your career and your life! You should and can find out as much as you can through all possible avenues.
This is by no means an exhaustive list of all of the considerations. The surprising thing to some of you might be that it contains no assessment of personal care-abouts like: what is the commute, what’s my job title, what’s my salary, benefits, how many shares are outstanding and more. Those are important things, but if you don’t assess the company using all of the parameters I listed above, the company might not be around long enough for you to enjoy those personal needs. Again please review this other blog post "What Are Your Top Priorities When Considering a New Job?" to discuss that perspective.
More importantly, if you get thumbs up on all of those questions above, you won’t have to ask “What is the exit strategy for the company?” because you’ll already know. Then hopefully a few years down the road you’ll be happy when the acquisition (or IPO) occurs, as expected.