book, Selling Your Startup, Alejandro makes a great contribution to the startup community by addressing the less commonly covered subject of navigating the other end of the startup lifecycle intelligently. Understanding this process can enable you to meaningfully harvest years of hard work.
Whether you are a later stage startup receiving inbound offers or are encountering tough times and contemplating a distress sale, this book will help you build your business with the end in mind. It will help you master the art of the exit. If you foresee one in the near term, then this book will serve as your field guide.
It will walk you through strategies, preparation, paperwork, and processes. It will help you with a decision framework for your next chapter after. After monumental sacrifices, it is a travesty to see founders and teams end up with unfair outcomes during M&A processes. If you want your mission, team, and consumers to continue to flourish beyond an exit, and maximize the outcome for everyone in a win-win manner, then it's time to turn to the next page …
—Bhavin Turakhia
Founder
Zeta, Flock, Radix, CodeChef, Directi
1 Seeding What Would Grow into Panthera Advisors
I first dipped my toes into the acquisition world while running my previous company, Onevest, which was backed by 14 different venture capital firms.
Building Onevest was a wild ride—full of terrible lows and exceptionally steep highs—but it became one of the largest communities of entrepreneurs, supporting over 500,000 founders in 234 countries.
Onevest and its portfolio of companies provided services such as cofounder matching, accelerator programs, a vibrant Q&A discussion board, key workshops on everything related to building and scaling businesses, and a platform where investors could meet and invest in startups.
It was a dynamic and deeply loyal community.
Accelerated Growth through Acquisitions
On the journey of building and scaling Onevest, part of its growth was organic, which we absolutely lucked out on, but the other part of its growth was attained through acquiring major competitors in the space.
In total, we acquired three of our direct competitors, which was bold and certainly risky, but it turned out to be a strategic move in the end. Two of those transactions, CoFoundersLab and FounderDating, were purchased in the millions of dollars and were a bit complex, given all the stakeholders who had a hand in the pot.
In one of those deals, we inherited investors who were not very sophisticated in these sorts of deals. A ton of back-and-forth negotiating ultimately shot the billable lawyer hours through the roof.
As newbie investors, they would either get stuck on standard terms or they would request things different from what was generally accepted in the market. That proved to be a painful but valuable lesson I will never forget. This specific experience is the reason I typically warn entrepreneurs to stay clear of non-sophisticated investors.
These kinds of investors can literally blow up a good deal, or at least significantly complicate things. Believe me, it can be frustrating and complete nonsense when you experience it firsthand. It's almost as if someone is throwing stones at their own glass house—but what can you do?
Yet those specific deals each came with important lessons that really helped me to understand how startup acquisitions work from an operator's perspective.
Acquisitions, to my surprise, were one hundred times harder than rounds of financing. And there's dealing with all types of emotions and egos, so mastering psychology is key.
Inbound Interest and a Path Forward
About eight years into building the business, Onevest started to receive inbound interest from companies that were drawn to our distribution capabilities, data, subscription structure, and access to the venture world.
The offers to buy the company couldn't have come at a better time. I had spent nearly a decade building Onevest with my wife, Tanya Prive, and at that time, she was pregnant with our second and third child (yes, identical twins!). But we soon found out the pregnancy held other surprises for us.
At six months, Tanya was diagnosed with twin-to-twin transfusion syndrome, a rare condition affecting the placenta in identical twin pregnancies where blood is transfused disproportionately from one twin (donor) to the other (recipient), causing the donor to have decreased blood volume and the recipient to be overloaded with blood, which often results in the death of one or both babies. With that diagnosis, Tanya was rushed into the hospital for an emergency C-section.
Our twin daughters were born at 28 weeks gestation, weighing in at 2.4 pounds and 1.7 pounds, respectively, which catapulted us into weeks, and then months, where our baby girls fought for their lives in the hospital. After 129 and 180 days, respectively, at the neonatal intensive care unit (NICU) at Mount Sinai in New York City's Upper East Side, they were finally discharged and able to come home. Our lives had changed, and I knew that stepping back from the daily grind was the right thing to do for myself and Tanya.
Before our girls came home, our four-month-old daughter, Alya, had to undergo heart surgery. As she was wheeled into the operating room, I was preparing the agenda for a board meeting on the four acquisition offers the company had received. I wanted to be near my daughter that day, but the offers left us no choice.
One of the acquisition offers had a 24-hour expiration date. It was December 19 and the members on our board were about to check out for their holiday vacations. It was literally the only time we could get everyone together.
I was a wreck thinking about all the things that could potentially go wrong with Alya's surgery, but I had to sidebar my thoughts to get our board aligned. We unanimously agreed that pursuing an acquisition was in the best interest of our stakeholders. But how did we get to these four acquisition offers in the first place? It all began with me finding Mike Seversen.
Choosing My Wingman
I instinctively knew it wasn't wise for me to tread the transaction path alone, so I began searching for a master banker who would help me navigate any merger and acquisition (M&A) landmines and optimize my chances at a successful exit. To have the best outcome, the deal needed to be viewed not solely as a financial acquisition (all based on revenues and EBITDA) but more as a strategic acquisition.
But in meeting after meeting, I was greeted by more or less the same person: a suit-and-tie Wall Street guy with little to no operating experience. After speaking with tons of potential M&A advisors, I was getting desperate. I knew the kind of person I needed to make the deal a success, and I felt as though I was looking for a needle in a haystack.
Finally, after endless research and asking around, I had a major breakthrough. I connected with Mike Seversen. He was in every sense of the word a true rock star. Sure, he had all the bells and whistles you would expect: Stanford undergrad, MBA Harvard graduate, and a 26-year career in the mergers and acquisitions space, but that wasn't what sold me.
Mike had a rare, heightened emotional intelligence, as well as the operational experience from running his own entrepreneurial ventures. I knew that if anyone could pull off this transaction, it was going to be Mike working with me as a team. I was strong on the business development side and relationship building, and Mike was a wizard of operations, numbers, and creative strategies. He was also keenly skilled in navigating big egos.
Once Mike and I were on the same page, we presented the plan to the board. As soon as the plan received board approval, we immediately got to work.
Our M&A Journey
We ended up with four letters of interest (LOIs) to buy our company. LOIs are the formal way acquirers tell you they