“Can I meet with you today?” Usually, when I get such a call, which I do about once in two weeks, the entrepreneur wants to meet immediately. In this instance, I suggested that we can meet the next Tuesday. The entrepreneur, let’s call him Jack, persisted, “If it’s okay can we meet today please?” So I agreed we’d meet at 530pm that evening and moved around a few meetings to make it happen.
At about 445pm I get a call. It’s Peter, Jack’s partner. He says “I’m going to be about 10 minutes late.” As I’m wrapping up a meeting, I tell him “Don’t worry about it. I will be at the coffee shop. See you there.” At that time, I didn’t pay attention whether Peter had said “we’d be late” or “I’d be late.” So at 530pm, I’m surprised to see only Peter show up with no sign of Jack.
“So what was so urgent that it couldn’t wait till next Tuesday?”
Peter was polite enough to apologize for Jack’s absence, “A major customer crisis has arisen. Jack had to go in person to placate the customer,” before jumping into why he’d asked for the meeting.
“BigCo has made us an offer. We’d approached them as a strategic investor. As we talked to one another, the discussions turned into an M&A one. They are interested in acquiring us. So we’re looking for advice on what we should do.”
Over the previous six years Jack, Peter, and another partner had at first bootstrapped their tech business and then raised both an angel round and a series A. They were on the verge of operational breakeven and had impressive Fortune 100 customers that any startup would kill for. They’d also dabbled in hardware and systems, pivoted a couple of times and overcome significant challenges in pulling together a fragmented supplier marketplace. In short, they were not just smart and hardworking but successful by any measure.
“What do you want?” I asked. “What does Jack want?”
Peter’s responses, many of which were questions rather than answers, sounded similar to ones that I’d faced more than a decade ago when my own startup was acquired. And one that I’ve heard from many entrepreneurs since. Most founders rarely stop during the madness that is doing a startup is, to ask, let alone answer these questions. So regardless of where you are in your own startup journey, here are some questions for you to ask yourself. I’d suggest revisiting these once a year, more frequently they’d be a distraction.
What do you want? Why are you running/doing a startup? To make a zillion dollars? Because people don’t have easy access to mental health? Because every kid should go to college? Whatever be your reason – only money, only greater good, some combination of both or yet another reason, knowing what it is, is important. This will help you figure out, are you close to it? And regardless of your distance from it, do you want to keep doing it?
How much money do you want? Despite startups being businesses, many entrepreneurs haven’t really put thought into how much money, specifically, they’d like to make or have. So when they are faced with a sudden offer to sell or particularly when they face a hostile or shall we say unwilling ejection, they are in no position to figure out what they want in any dispassionate manner. Surprisingly many entrepreneurs, starting with myself, find that they are uncomfortable talking about money for themselves. So this is a good question to answer if only to get comfortable talking about it.
What do your partners want? Usually your co-founders, especially at an early stage startup, much like you would also have not given this much thought. But in some cases may have greater clarity, which is usually a good thing, but you’d better know what it is and how different it is from your own answers to the question. Again, they may have thought of things only in terms of money or in terms of outcomes and not money. Knowing the answer to both and knowing your differences will be immensely useful.
What does your team want and what do you want for them? This may or may not matter to you, or you may even be unclear if this matters to you or not. Knowing this is critical at some many practical and even ethical reasons. For instance, what matters to them – that they work in a startup, the freedom or independence they get maybe very different than what they get from BigCo once they acquire you. What are they likely to get monetarily if you sell your company?
What will you do tomorrow, if you get what you want? If your company were to be acquired today, in an all cash deal, with no strings attached (and let me know if there are such deals out there 🙂 what will you do tomorrow or ninety days hence, after you take that well-deserved vacation. In many ways, this is similar to the first question around purpose? If you’d still do what you are doing today, what does that tell you? And if you’d do something totally different, what are you waiting for – what should you do differently today?
I believe if you ask and answer these questions both individually and collectively as a founding team, periodically, it would help you make better decisions when you are at crossroads in your startup.
As many companies that I’ve been involved with grow past their fifth or even seventh anniversary, they are facing new questions around exits – be the outright sales or mergers or in some case existential questions. I’m hoping to write about these questions in what I’d like to think of as “Selling your startup” series.