How to Get Acquired, Why Impact on Market Size > Market Size - Tactician: #00101

They say if you want to get acquired, you should act like you’re already part of their team.

So, I started showing up at their meetings.

I’m not sure it’s working but their coffee is fantastic!

After disabling Tactician on the 100th day of a 99 day streak, Substack has gotten back to me!

My publication is is in violation of the content guidelines and won’t be reactivated.

Shucks.

Of course I’ve appealed a second time. Let’s see what’s next from here.

How to Get Acquired

Why Read:

• A startup founder should read this article to learn practical strategies for increasing the chances of getting an acquisition offer for their startup.

Featuring:

• Jason M. Lemkin, SaaStr Founder

• Link: 

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

Key Concepts and Tactics:

1. Acquisitions are relatively rare for startups.

   • Point: Most startups will never receive an acquisition offer, let alone a good one.

     • "First, bear in mind acquisitions are relatively rare. The vast majority of startups will never get one acquisition offer, let alone a good one."

2. Building the best product in an important space increases the likelihood of an acquisition.

   • Point: Focus on creating the best product in a significant market to attract potential acquirers.

     • "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."

3. Gaining attention through media and events can help attract acquirers.

   • Point: Leverage media coverage and events to increase visibility and catch the attention of potential acquirers.

     • "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."

4. Building relationships with senior executives at potential acquirers is crucial.

   • Point: Invest time in developing relationships with key decision-makers at potential acquiring companies.

     • "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."

5. Engage with Private Equity firms that approach you, especially after reaching $10-20 million in ARR.

   • Point: Be open to conversations with Private Equity firms, particularly as your SaaS company grows and reaches significant revenue milestones.

     • "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."

6. The strategies for building a great business align with those for increasing the chances of an acquisition.

   • Point: Focus on creating a successful company, as the steps to do so naturally improve the likelihood of an acquisition.

     • "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."

Why Impact on Market Size > Market Size

• Why Read:

  • Insightful perspectives on evaluating market size and a startup's potential to create new markets rather than just addressing existing ones.

• Featuring:

  • Tomasz Tunguz, General Partner at Theory Ventures

    • “The Market Size Mistake”

  • London Business School, One of the world's leading business schools.

    • “How Lemonade tore up the insurance rulebook”

Key Concepts and Tactics:

1. Assessing a startup's impact on market size is more valuable than evaluating the current market size.

   • Point: Ask whether the startup is increasing, decreasing, or maintaining the market size, rather than solely focusing on the existing market.

     1. "Years later, I listened as Bill Gurley shared his thoughts about market size. He asked himself a question : whether the startup was increasing, decreasing, or maintaining the market size? (I can't seem to find the link - but I have it in my notes!) I added that question to my diligence list when meeting startups."

        -Tomasz Tunguz

2. The key question is whether the company can create the market, not if the market is large enough.

   • Point: Shift your perspective from evaluating market size to assessing the startup's ability to shape and create the market.

   • "Now much later, having seen many companies create categories or reinvigorate aging ones, the question I ask myself has evolved. It's not as the market size large enough? Instead, it the question is: do we believe this company can create the market?"

     -Tomasz Tunguz

3. Market size is a dynamic outcome influenced by the efforts of market participants.

   • Point: Understand that market size is not a fixed metric but rather the result of the actions taken by startups and other players in the market.

   • "Market size is the output of all the players marketing, selling, building. Their efforts alter, distort, & juice the supply/demand curves of macroeconomics. It's not a given - not an output or a steady-state CAGR."

     -Tomasz Tunguz

4. Startups that successfully create demand and change market dynamics can build massive, category-defining businesses.

   • Point: Recognize the potential for startups to drive demand, transform markets, and create enormously successful companies by taking risks with innovative products.

   • "Often it's the startups that engender the demand, change the market dynamics, & make markets massive by taking risks with products. When done right, these founders create category-defining businesses like Shopify (now worth $90b)!"

     -Tomasz Tunguz

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