Dear SaaStr: How Do You Build a Real Exit Strategy?

First, bear in mind acquisitions are relatively rare. The vast majority of startups will never get one acquisition offer, let alone a good one.  Still, it’s not random.  I’ve been through it twice as a founder and about ten times as an investor.

At a high level, three things you can do that aren’t very hard will increase the odds you have an “exit”:

  • First, build the best product in an important space. It really is this simple. If you are #1 in an important space, the potential acquirers, if there are any, will eventually pay attention.
  • Second, get attention. Acquirers read TechCrunch just like everyone else. They assemble a list of companies they should pay attention to based on media, events, and customer and partner conversations.  This isn’t magic, but it does help.  You’d be surprised how leaders at Big Tech Cos hear of startups, and who they know about, and who they don’t.  It can be pretty isolating off in that corner office.
  • Third, build relationships. Get to know as many of the senior folks at your potential universe of acquirers as you can. And this can and will take years.  You’ll hear this story again and again from founders that were acquired.  This is good for your business anyway.  But as you’ll see below from one of the ex heads of M&A at Google, so many deals are driven by folks well know for years to the head of a certain division, product, area, etc.:
  • And fourth, just talk to PE firms that approach you, especially after $10m-$20m ARR, that reach out.  This is a world you likely won’t know much about in the early days.  But in SaaS, as you cross $10m, $15m, $20m ARR … Private Equity firms will start to reach out.  Just take the call.  They have money to buy good SaaS companies not burning too much cash.   There are pros and cons to selling to PE.  But one big Pro is you often don’t have to stay.  Vs. a tech company will want you to stay for years.

It really is that simple. I’ve been through 2 acquisitions as a founder, 2 as an executive, 10 or so as an investor or so, and this is “all” it took. Nothing else matters.

And most importantly — this is the pretty much the exact same stuff you need to do to build a great business.  So you don’t have to over-engineer it.  But do get out there more.  

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