Why That “$50M to $1B” Acquisition Offer Isn’t Always What It Seems: A Founder Reality Check
I’ve seen this story play out multiple times as an investor, and the lessons are both counterintuitive and crucial.
TL;DR: In one of my very first investments, the founders turned down a $50M acquisition to see their start-up sell for $1B years later – yet walked away with roughly the same personal outcome they would have had by taking the first deal.
The Tempting Early Offer
Way back in 2013, I made an early investment in a promising startup. The team had built impressive traction without raising much capital – maintaining strong ownership and control. It was early, but by $1m ARR they’d pulled ahead of their seemingly similar legion of competitors.
Then came the moment many founders dream of: the CEO of a public company wanted to acquire them for $50 million. The founder actually reached out to me to have lunch, and asked if the founders would. be receptive. I said I thought so, but I didn’t know.
With minimal outside capital raised, this would have been life-changing money for the founding team. But they had bigger visions. They said no. In fact — they said “No at Any Price.”
The Long, Long Road to a Bigger Exit
8 years later they were acquired for $1 Billion. What followed was the entrepreneurial equivalent of climbing startup Everst:
- 5 different management teams
- 2 more CEOs
- 4 more venture capital rounds
- Years of grinding, pivoting, and scaling
- Significant dilution with each new funding round
Eventually, the company sold for nearly $1 billion – a 20x multiple on that original offer!
The Surprising Math Reality
Here’s where things get interesting. Despite the massive headline number, the founders made approximately the same amount they would have walking away from that original $50M deal years earlier.
Why? Three critical factors:
- Dilution is relentless: Each funding round chipped away at founder ownership
- Liquidation preferences stacked up: Later investors received their returns first. While minor, it still impacted returns.
- Time is expensive: The founders spent years of their lives getting to the bigger exit. In fact, one passed away before the exit. I think about that a lot.
The Hidden Costs Nobody Discusses
What the headlines never show:
- The psychological toll of multiple management team changes
- Founder burnout and relationship strain
- Opportunity cost of other ventures never pursued
- Years of life dedicated to a single outcome
When To Take The Early Exit
Here’s my hard-earned advice for founders:
If an early acquisition offer would be truly life-changing for you personally, give it serious consideration. The glamour of pursuing a unicorn exit often masks the brutal reality of what it takes to get there.
Sometimes the “smaller” win that puts millions in your pocket today is worth more than the theoretical bigger win that might come years later after significant dilution.
In fact, my advice today is Default Yes. Default — take an M&A offer if it’s good. If you are 95%+ sure you can built something 10x bigger, then say No for sure. Go Long.
But default to Yes for a strong M&A offer. At least to talk about it from that perspective.
Brian Halligan, co-founder and Chair of $30B+ HubSpot … agrees:
The SaaStr Bottom Line
Don’t automatically chase the bigger headline number. Do the math on what you’ll actually take home, factor in the true cost of time, and make the decision that’s right for you – not what looks impressive on social media.
