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Non-IP exit and acquisition strategy

Hello fellow FD's.

Quick and dirty one for you.

Outside of complementary or competitive IP, what kind of assets should a start up look to develop in order generate acquisition interest? Effectively, why do firms acquire companies which don't have IP? I understand eliminating competitive threats is a major one but what are the others major factors? If we can take it one further, what can an organization do internally to ensure they are preparing for acquisition pro-actively?

If it helps, this is in the context of an SaaS platform which reaches multiple industries, though general feedback is still welcome.

Much appreciated,

13 Replies

John Wallace
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John Wallace Entrepreneur
President at Apps Incorporated
Customers, process, and team. For acquisition, make sure you know your numbers and how to reliably achieve them.
Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
Strategic product fit is a big factor, as is engineering talent. Some high-profile acquisitions also happen for what seems like PR ops for larger companies (usually only if you're a "sweetheart" of your industry).
Dimitry Rotstein
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Dimitry Rotstein Entrepreneur
Head of R&D at SafeZone
One of the most common reasons for acquisition is hiring. So much so, in fact, that there is a special word for it - "acquihire". In such a case the only important asset is the team, whereas the product, the business, and such mean next to nothing in and of themselves. To be proactive for acquihire is to prove that you are impressive people that can get the work done.
Scott R Brittain
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Scott R Brittain Entrepreneur • Advisor
CTO Snap Kitchen (We're hiring!)

1. Always be killing your core business.Revenue and customers win. #MandatoryResponse

2. Compile an acquirer list. Who would you be a good fit with (asBarnathan indicates)? Who can you help? Who would help you?

3. Raise your corporate and individual visibility for the companies on your acquirer list. Blog, tweet, attend, stand out, contribute, open source, pontificate, network,etc.

4. Build complementary value props and features for the acquirer list products.

Ryan Nurmela
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Ryan Nurmela Advisor
Managing Director at bigCampus, Inc.
Process, scalability, brand, assets (personnel, goods, space, etc.). If you're not selling IP, then you're most likely selling the capacity/capability to do something. Such that, if you handed the company over to someone else they'd be able to utilize that capacity/capability. You can think of buying a company much like buying any other product, "How useful is this?" The better you can answer that question, the better off you'll be in a sale. Execution can be stronger than IP in many cases. Ryan Nurmela Co-Founder & CEO, QuantumCamp Chairman, Leaf Education [removed to protect privacy]
Will Koffel
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Will Koffel Entrepreneur • Advisor
Co-Founder at Outlearn
Your intellectual property goes beyond patents, trademarks, and algorithms. It's bundled up in all the mistakes you made on your way to a successful product. Thatinstitutional knowledge makes you valuable to a bigger company, because the bigger the company, the bigger it costs to make mistakes. So in practice, that means 1) product (even if it's "copyable" by a competitor, they will likely copy the wrong parts and be seen as derivative anyway, and 2) team, who will bring a necessary confidence to the table when strategically integrating your product into the larger business.
Fintan Ryan
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Fintan Ryan Entrepreneur
Industry Analyst at RedMonk
Team, process and knowledge. A strong effective engineering team is always of interest to other companies.
Lawrence I Lerner
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Lawrence I Lerner Entrepreneur • Advisor
Digitalization and Transformation Coach
Firms get acquired for one of two reasons. Talent (acquihires) or a solid product/idea. Hotmail is one of the best examples. It was well thought out but not built. Microsoft paid quite a bit for an idea. Lawrence I Lerner \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ Direct: +[removed to protect privacy] Blog: RevolutionaryInnovator Twitter: @RevInnovator
Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
Not just an idea, but a product, team, or IP required to execute on the idea. If Microsoft simply wanted to get into the email business, they could have built a Hotmail clone on their own - ideas aren't secret anymore once they're out on the market.
Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
Whether or not the company is actually worth what the acquirer pays for it is another matter (Powerset comes to mind as an IP/product acquisition which was probably overhyped), but Microsoft's perception was certainly that it was valuable for what it was building.
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