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Why Plan Growth as Early as Possible, What Founders Should Know About Getting Acquired - Tactician: #0077

March 13, 2024

"I admire those who plan their growth early. They're like the kid in class who asks about the homework for next week while the rest of us are still trying to remember where we left our textbooks. They're on a whole different level."

13/03/24

Why Plan Growth as Early as Possible

Why Read:

  • Understand the critical role of distribution in achieving breakout success and how to innovate beyond diminishing returns of common tactics.

Author:

  • David Peterson, Partner at Angular Ventures

Link: 

Key Concepts and Tactics:

  • Importance of Distribution Advantage:

    • "To create a truly breakout company, you need some sort of distribution advantage."

  • Diminishing Effectiveness of Distribution Tactics:

    • "Every successful distribution tactic is copied until it’s no longer effective."

  • Concept of Diminishing Distribution Arbitrage:

    • "Second-time founders obsess with distribution because they’re intimately familiar with what I like to call: the law of diminishing distribution arbitrage.”

    • “If you’re a student of the startup world, then you probably remember when new distribution tactics first came on the scene.”

    • “But the effectiveness of each of these innovations lessened over time. A simple referral code link doesn’t have the same impact it once did. Long tail SEO is a morass...”

    • “At least part of what made these tactics work to begin with was their novelty. But I think the real secret is that each tactic was tied to a key product innovation.”

  • Importance of Product Innovation to Growth Tactics

    • “At least part of what made these tactics work to begin with was their novelty. But I think the real secret is that each tactic was tied to a key product innovation.”

    • “Paypal’s referral hack ($10 for every user you invite) was so powerful not just because they were giving money away, but because the money showed up, immediately, in your Paypal account. And then you could use it, immediately, to pay for stuff. The immediacy, made possible by Paypal’s underlying technology, was what made it magical.”

    • “...it did not work for Airtable or any of the other SaaS tools out there (who cares about “credit” in my account when I’m paying with my company credit card?).”

  • Preemptive Planning for Distribution Advantage:

    • “At first glance, it may seem like something you shouldn’t waste your time on until after you find product-market fit, but I strongly believe you need to have some sort of hypotheses about what your distribution advantage will be from the very beginning, as those hypotheses may impact how you approach building your product today.”

What Founders Should Know About Getting Acquired

Why Read:

  • Gain insights into navigating the complexities of the M&A process, ensuring preparedness and strategic advantage.

Author:

  • Amelia (Lerutte) Ibarra, General Manager and Senior Vice President at SaaStr

Link: 

Key Concepts and Tactics:

  • Types of Acquisition Deals:

    • "Talent — To get the expertise on your team and more firepower."

    • "Asset — To gain certain assets like code, patents, data sets, etc, while leaving the team and often the company behind."

    • "Talent + Asset — Taking everything to expand the business or some core piece of the product."

  • Before the M&A Process:

    • "Build a Great Company: M&A is a bit of a black box, similar to a hiring process, but 10x harder."

    • "Talk to Product: The reality is that the M&A team is just a team that facilitates the transaction and negotiates with you."

    • "Be Financially Viable: The more money you raise, the fewer options you have for an acquisition."

  • During the M&A Process:

    • "Sell Hard: You really need to convince the acquirer that your company is going to dramatically catapult their company and their personal objectives."

    • "Play the Field: If you’re going through an M&A process, you should assume it will fall through."

    • "Keep It Quiet: When you’re negotiating, you want to keep it to yourself."

  • After the M&A Process:

    • "Get a Financial Planner: It’ll be the worst, most complex, and painful tax season of your life."

    • "Hit Your Metrics: If you’re looking to launch a particular feature in a product, they could tie your payout to the number of users of that feature."

    • "Get Back in the Arena: At Google, most founders left well before their vesting was up."

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