First of all, what about finding a company that’s going to IPO? Based on all we know, an IPO exit for a technology company has been extremely rare and difficult over the last few years. So assuming getting acquired is a good exit for a company, it’s employees and shareholders, let’s proceed with our discussion.
At the beginning of this new decade WSJ published a blog post noting that Cisco Acquired Most Start-Ups In Decade, But Oracle King In ‘09. It showed the serious number of startups gobbled up by the big boys between 2000-2009. I have linked the images of the two tables below using the URL’s from the WSJ blog site for your viewing pleasure. These are just the big boys, but just simple math comparing the hundreds of technology startups out there all looking for a graceful, profitable exit, indicate that the odds are high to say the least.
For those lucky enough to be acquired, you know the drill. In some cases like the recent IBM acquisition of Initiate Systems, Informatica of Siperian (disclosure my former company) and Oracle of GoldenGate (disclosure another of my former companies), the fiscal result for the shareholders and employees of the company hasn’t been bad. However as with any acquisition there is collateral damage and that shouldn’t be forgotten as I blogged about in Post Siperian Informatica Acquisition Opportunity – Great People Available. With many unfortunately out of work here’s hoping that better times are ahead for all of us.
While it’s often no fun to be acquired, particularly if you end up losing your job. It’s still better to be acquired than to have the company fail and shutdown. Yes, lots of companies actually do fail! Google the words Why Tech Startups Fail and you’ll find no shortage of articles on the topic. To take a more positive view, this article focuses on being a mini guide to what you should look for in order to make sure that you are on the acquired side of that equation, which hopefully equals success.
Maybe I’ve just been lucky (if you want to call it that), but every company I’ve worked for since 1997 has ended up being acquired (some more than once since I left).
My companies since 1997 reads as follows:
- Synon Corporation – Acquired by Sterling Software in 1997 later acquired by CA
- Evolve Software– IPOed in 2000 and later acquired by Primavera Software in turn later acquired by Oracle
- MetaTV– Acquired by Comcast Corporation in 2005
- GoldenGate Software – Acquired by Oracle in Sept 2009
- Siperian– Acquired by Informatica in Feb 2010
I’m sure many of you reading this blog post may have had similar experiences if you, as the Knight said to Indiana Jones in the Last Crusade, “Chose Wisely”. Some of it of course is pure luck, and by no means were any of these lifestyle changing. Definitely nothing like those who’ve worked at Paypal, then YouTube and other very profitable acquisition and exits. So I’m not exactly the model for financial success from being acquired, but just looking to provide some insight to the some of the factors that may help you find the right opportunity.
AsI look back I believe that two things were key:
#1 is a little self serving and a bit of rah rah. So skip this section if you want.
I believe self confidence and ability pays an important role IF you are given an opportunity to directly influence and impact the company you join. I have been lucky to be in the product management and product marketing leadership function for all my prior companies. My objective has therefore always been to make any company I work for the leader in their respective markets. I feel also that I have been able to be an integral part of contributing to the company’s strategy and have also influenced internal culture and motivation to help galvanize everyone to work for the common goal and to strive for greatness. With my hand on my heart, I believe I have helped achieved this prior to leaving each of the companies I’ve worked for. So the only message here is that YOU CAN MAKE A DIFFERENCE, if you are given the right opportunity and environment to help your company succeed. Now that I may have you a little fired up, let’s get pragmatic …
#2 is more relevant to how you can benefit from the main title of this post which is “How to make sure the next company you work for gets acquired”. The answer: YOU SHOULD THINK LIKE A PRODUCT MANAGER. Since I have been a PM for the last 15 years I have always taken the time to review any company I am interested in via detailed research and analysis. By evaluating the potential market, assessing the technology, seeing the potential of the solution, thinking about the value proposition, determining the competition and evaluating the people who I’ll be working with, particularly that of the leadership team. All of this PRIOR TO THE FIRST INTERVIEW. This serves a dual purpose. Firstly you should know as much about the company as possible and decide for yourself if you even want this job if offered in the first place. Secondly, it will help you be well prepared during the interview process. PARTICULARLY IF YOU ARE INTERVIEWING FOR A PM POSITION. It’s surprising how many product managers I’ve interviewed over the years who don’t really have a good answer to the question “Why do you want to work here?” And worse don’t know the fundamentals of the company they are interviewing with. How could the company hire a PM and entrust them with an important revenue generating product line, if they can’t assess the market themselves for what should be a very important decision for their own personal benefit, the next step in their careers?
There’s an old adage that points out that people spend more time evaluating their purchase of a $1,000 TV, comparing prices, looking at reviews and features than they do a $5,000 purchase of a stock. In some cases this could be said about those looking at a new job in that when looking for work, many of us interview first and assess later.
I’m not saying that everyone always gets a choice, particularly in difficult times such as these with so many good people out of work. My main point is that if you have the opportunity, there are a few key things to look for and it’s definitely beneficial to do your homework first; the by-product of which might just mean that you’ll do better at your interview.
If you are a practicing product manager this should be 101 for you. But if you’re not a PM, I’ll boil it down to a few key questions that are worth asking or at the very least you should assess for yourself:
- Is the company backed by VCs with a good track record? – By this I don’t mean merely top tier Venture Capitalists (VCs). There are plenty of smaller VCs who have been successful, just as there have been failures by portfolio companies of brand named VCs. Don’t think of VCs as just enormously wealthy and lucky individuals reaping vast profits, in times like these VC money is hard to come by and the best ones are very thorough. So it’s likely that the company had to go through more than one proctology exam in order to raise the capital it has today. If times are booming, you should be a little more suspect because historically there are always times (think dotcom boom) when corners get cut. You may think that if you’ve evaluated the VC’s that’s enough, because of the work they will have put into assessing the company before investing. This may be true, but you owe it to yourself to play VC or PM and to evaluate if you would invest in this company, let alone trust your career to it. So understanding the “financial mechanics”, e.g. how much is invested? How many shares? How has the invested money been spent? What is the stomach for the current investors to ante up more money if the company experiences a lean quarter (or two)? are all important things to know. Let’s move on to the next questions.
- Does the company have runway? – Meaning if the company is not profitable. What is the time frame based on current course and speed and plans before the company stops spending more that it receives? If the company just raised money, this is not a required question vs. if say the funding was 12 months ago. We all know how companies are able to blow through capital very rapidly, particularly if you look around and there are lots of freebies like lunches, nice offices etc. This might be ok if the company is hauling in customers and revenue at a steady clip. But for a company in startup mode, cost control is a good thing. understanding the “financial mechanics”. how much is invested? How many shares? How has the invested money been spent? What is the stomach for the current investors to ante up more money if the company experiences a lean quarter (or two)?
- Does the company you are joining have defensible IP (intellectual property) and strong technology?– Without this it may still be possible to be successful, such as a social networking or ecommerce site where first mover, brand or vistor acquisition is a telling metric. But if you are looking at software for example, the IP is the “value” of the company, especially early on when there are few or no customers. While a potential acquirer will value revenue, customers and profitability, in reality companies such as Oracle, Informatica and others buy for innovative technology which they can’t cultivate themselves. Even Google these days is buying back companies from ex-employees who have left to innovate (witness Google’s recent purchase of Aardvark.com)
- What is the experience level and track record of the executive team and other leaders?– Has the CEO been successful in the past? As they say “previous performance is no indicator of future performance”, but experience plays a major role in navigating the turbulence that is inevitably ahead. What about the other team leaders? I say other leaders because the heart and soul is often at the director level of a company. But collectively it takes all the moving parts to contribute for maximum success.
- Do the leaders of the company appear to get along?– This one is hard to gauge, but in my mind it is an often overlooked but critical point because team chemistry and absence of politics immediately double … Errr no, triple the chances of success IMHO. The attitude of each departmental leader within an organization has a profound impact on those who work for them. The more joint alignment and focus on the goals of the company, the better the chances of success. Case in point, the alignment between sales and marketing. Read Christine Crandell’s excellent blog for many posts on this topic.
- Is this a growing or large market?– There is so much information on the web these days that even if you don’t have subscriptions to Gartner or Forrester reports, there are so many bloggers out there voicing their opinions that you can’t help but trip over information that will point you to the potential of your company-to-be.
- Does the company have a long term vision while being focused in the short term? – Having a concrete idea of where the company wants to end up beyond “we want to be the next salesforce.com” is important. I look for leadership who sees opportunity and potential everywhere but is measured in their focus and approach. As David Packard of HP fame once said “more companies die of indigestion than starvation”. It’s great that your product opportunity is like a buffet but it requires self control to not give yourself a heart attack in the process. Attempting to do more than a company can realistically accomplish with given resources is a different type of receipe for disaster and often the hardest one to own up to.
- Who is the competition? – You find this out the same way you do looking at the potential of the market. Unless you are joining some secret stealth company that’s invented something hither to unseen. There is always competition, even if that competition is that there is currently a less efficient way of doing what your prospective company-to-join is trying to improve on.
- What is the value proposition? – So you’re not a PM, but you can and should ask, is it faster? better? cheaper? Preferably the answer to all 3 questions is yes and better relative to the competition you uncovered in question 8. Has the value been proven out by existing customers? Not that you can find that out easily because it’s hard for a company to get their customers to talk in public. But at the very least, you should be able to get internal anecdotes from employees about the successes of any customers to date.
- How true is all that you’ve been told really? – The ideal scenario is that you’re being brought in by someone you know and trust who is already at the company. But failing that, use LinkedIn now and often. This can be ironic since you know the company will be looking at your linkedin profile during the interview process. So go ahead, find connections of connections and evaluate the profiles, recommendations and credibility of the team you’ll be working with. If smart people with good judgement are already at the company, your chances of success are much higher. This is even more important if you can’t or don’t feel that you are in a position to ask those questions during your interview process. Perhaps your role isn’t as key to which you won’t be privy to that information. But hey it’s your career and your life! You should and can find out as much as you can through all possible avenues.
This is by no means an exhaustive list of all of the considerations. The surprising thing to some of you might be that it contains no assessment of personal care-abouts like: what is the commute, what’s my job title, what’s my salary, benefits, how many shares are outstanding and more. Those are important things, but if you don’t assess the company using all of the parameters I listed above, the company might not be around long enough for you to enjoy those personal needs.
More importantly, if you get thumbs up on all of those questions above, you won’t have to ask “What is the exit strategy for the company?” because you’ll already know. Then hopefully a few years down the road you’ll be happy when the acquisition occurs, as expected.
Cloud ‘N Clear Poll – You Make The Call!
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