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Dalton + MichaelDalton + Michael

A Founders Guide To Selling Your Company

In this episode of Dalton + Michael, the two demystify the process of selling your startup. They breakdown what an "aqui-hire" is, what "corp dev" is, and explain the acquisition math that is rarely talked about. They also discuss tactics around how to actually get acquired. Acquisitions are a topic a lot of founders are curious about but are afraid to ask, hopefully this video helps! Dalton + Michael is brought to you by @Standard_Cap Dalton Caldwell on X: https://x.com/daltonc Michael Seibel on X: https://x.com/mwseibel

Michael SeibelhostDalton Caldwellhost
May 7, 202631mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 0:36

    When selling makes sense: the S-curve bet and opportunity cost

    1. MS

      When investors have a lot of demand in investing in you is probably also-

    2. DC

      Yeah

    3. MS

      ... when acquirers will have a lot of demand.

    4. DC

      Oh, okay. Yep.

    5. MS

      And so it's this tricky catch-22 where you're like, "Why would I ever sell my company?" And you shouldn't sell your company if you think that S-curve could get you to billions in revenue.

    6. DC

      Yeah, you're basically making a bet, and if you think it'll be more valuable, you shouldn't sell.

    7. MS

      Yes.

    8. DC

      And if you think that maybe-

    9. MS

      If your S-curve gets you to [laughs] 50 million in revenue and you're at 10-

    10. DC

      Yeah

    11. MS

      ... maybe there's a better deal there. [upbeat music] This is Dalton + Michael, and today we're gonna talk about how to sell your company. [laughs]

  2. 0:36 – 1:53

    Why acquisition advice is rare—and why founders misread the market

    1. DC

      I mean, look, this is one-

    2. MS

      It's easy. It's easy. [laughs]

    3. DC

      This is one of those topics that, um, there's not a lot of content out there about.

    4. MS

      No.

    5. DC

      Uh, we did not make many videos at YC about how to sell your company. I put this-

    6. MS

      You're not supposed to sell your company. You're supposed to die [laughs] building your company.

    7. DC

      So I'd put this in the category of a question that a lot of people have-

    8. MS

      Yes

    9. DC

      ... they're afraid to ask-

    10. MS

      Yes

    11. DC

      ... about.

    12. MS

      Yes.

    13. DC

      And that it's, it's sort of underexplored, um, in the content universe.

    14. MS

      Very underexplored. I would also argue that, as a result, there are so many misconceptions. Seeing the number of fundraising announcements that are out there, I think one would assume there are far more acquisitions than there are. And now we kinda have a, a decent data set.

    15. DC

      Yes.

    16. MS

      Right? [laughs]

    17. DC

      We do. We have like an okay data set. [laughs]

    18. MS

      We might be able to confirm there aren't as many acquisitions as you might think. [laughs]

    19. DC

      Yep.

    20. MS

      And I think this might be a secret every investor knows and most founders don't.

    21. DC

      That's totally true. And again, it's a, it's an under-talked-about topic. It's awkward. Again, when you think about it, asking your investor how to sell your company is generally not the best idea. [laughs]

    22. MS

      No.

    23. DC

      Or a stranger. Say they're not your investor. If you're just asking random people how to sell your company-

    24. MS

      They don't know either.

    25. DC

      Yeah.

  3. 1:53 – 3:00

    What big companies usually buy: talent, not your product

    1. MS

      Yeah. And how many CEOs that buy companies do you get to talk to regularly and get their advice from? So let's help inform the audience. First, what do large companies look for in acquisition, and by far, what's the most common type of acquisition that large companies do?

    2. DC

      The answer is simple. The answer is talent.

    3. MS

      Yes.

    4. DC

      If you think about, um, what an acquiring CEO wants or needs-

    5. MS

      Yes

    6. DC

      ... human talent, skills they don't have in-house-

    7. MS

      Yes

    8. DC

      ... specialized skills-

    9. MS

      Yes

    10. DC

      ... products that are, that'll slot right into what they're doing. You know?

    11. MS

      I've seen this, yes.

    12. DC

      [laughs]

    13. MS

      And I think the, in terms of the volume of deals, talent acquisitions that really don't make people that much money are so much of the volume of deals. And I think it's interesting because sometimes you can see on TechCrunch or on Twitter, so and so company sold for $40 million. And I think that there's, like, a thing that happens where you think, great, so the founders made $40 million. [laughs] So explain, explain what really happened. [laughs]

  4. 3:00 – 7:14

    Acqui-hire economics: the ‘$20M sale’ that’s really job offers

    1. DC

      Yeah, so let's, let's break down the math.

    2. MS

      Yes.

    3. DC

      Um, this is called an acqui-hire.

    4. MS

      Yes.

    5. DC

      Acquisition hire.

    6. MS

      Yes.

    7. DC

      You know, if you're not familiar with the term. So let me break down how an acqui-hire is structured.

    8. MS

      Yes.

    9. DC

      First and foremost, let's assume it's a relatively small company-

    10. MS

      Sure

    11. DC

      ... because they usually are.

    12. MS

      Sure.

    13. DC

      Usually, every employee of that company gets put into a spreadsheet the, the acquirer would look at.

    14. MS

      Yes.

    15. DC

      They look at the LinkedIns-

    16. MS

      Yes

    17. DC

      ... and they're looking for the technical expertise of the people on that team. So they're looking for-

    18. MS

      Yes

    19. DC

      ... talent. Often-

    20. MS

      By the way, I'll go a step further. Often, the most important ones of those people are interviewed.

    21. DC

      Yes.

    22. MS

      And it's part of the process of getting this deal.

    23. DC

      And so in an acqui-hire, often you literally have to go do, like, a LeetCode interview.

    24. MS

      Yes, yes. [laughs]

    25. DC

      Your, your employees do-

    26. MS

      Yes

    27. DC

      ... with the, with the hiring folks on the other side.

    28. MS

      Yes.

    29. DC

      And that's to assess the quality of your technical team.

    30. MS

      Yes.

  5. 7:14 – 8:43

    How the acqui-hire marketplace really matches: desperation + rare talent

    1. DC

      Usually you're not. And so the way you should imagine this is there's, like, a marketplace that's fairly liquid of startups that are not working, I'm trying to think of a nice way to say it, not working, and maybe low on runway, or their investors are telling them they should look for an exit.

    2. MS

      Yes.

    3. DC

      And so that's part of the market. And then there's late stage, very large companies, um, that want talent, and they're desperate for talent.

    4. MS

      Yes.

    5. DC

      And most of the matches in this marketplace occur when there's a really particular, special, technical talent that the acquirer wants, um, that passes their muster, and ideally that technical talent is an expert in the thing that the acquirer desperately needs.

    6. MS

      Yes. Yes.

    7. DC

      So why don't you break down the, the desperate need part?

    8. MS

      What I found kind of seeing on the inside is, um, a company will look at their team, and they'll be like, "Okay, our ML team is lacking, and that's causing us problems X, Y, and Z. And when we try to go out and recruit ML talent, it's hard, yada, yada, yada. We've seen this company over here. We've interacted with them. We've, often we've done some little deal with them, like, so, like, we're their customer, and we're impressed with their talent." Assuming they are not doing well, which is most startup- [laughs]

    9. DC

      [laughs]

    10. MS

      If we know the people, we like there already, if we know the quality of their work, if comparatively we know how to slot them in and how fast we could get them going and da, da, da, da, maybe we're putting them on our list to talk to.

    11. DC

      Yep.

    12. MS

      And maybe we're trying to figure out when they're running low on runway.

  6. 8:43 – 12:05

    Corporate development (corp dev) demystified: gatekeepers, not buyers

    1. DC

      I think another thing to demystify is corp dev. So let's talk about corp dev. The real term is corporate development.

    2. MS

      Yes.

    3. DC

      And this is a person that works at a later stage or public company-

    4. MS

      Mm-hmm

    5. DC

      ... that has that in their title, and their job is basically to evaluate companies for acquisition. There's other aspects of corp dev which might be to invest in companies, but for the most part, if you interact with a corporate development person, it's about M&A.

    6. MS

      Well-

    7. DC

      Go ahead.

    8. MS

      I wanna push back on that. I think they think their job is to evaluate companies for acquisition.

    9. DC

      Well, I'm getting there. I'm getting there.

    10. MS

      Oh, [laughs] sorry. Okay.

    11. DC

      I'm getting there.

    12. MS

      I don't wanna jump the gun. [laughs]

    13. DC

      I'm just explaining.

    14. MS

      That's how they would describe their job. [laughs]

    15. DC

      Yes, that is how they would describe their job. Now-

    16. MS

      What's their actual job? [laughs]

    17. DC

      So the way that you should think about corporate development if you're a founder is that it's exactly like talking to an investor, and what I mean by that is it's the same numbers game where an investor might meet with hundreds of companies, many hundreds per year, and act really interested-

    18. MS

      [laughs]

    19. DC

      ... and make one investment a year or two investments a year out of the hundreds. And so for a lot of investors, like, a 1% writing them a check rate for meetings is, like, a pretty good investor.

    20. MS

      Mm-hmm.

    21. DC

      Corporate development tends to be very similar. And so what happens-

    22. MS

      Yes

    23. DC

      ... when you're a founder is it's very easy to get connected to corporate development. They're not hard to get connected to, and they're very good at seeming extremely interested and very nice-

    24. MS

      Yes. Yes

    25. DC

      ... and have lots of reasons things will take more time. And the surprise here is that often to get acquired, at best what they can do is introduce you to senior management that would acquire your company. They're basically gatekeepers.

    26. MS

      Yes.

    27. DC

      And their job is to filter, sort through all the stuff-

    28. MS

      Yes

    29. DC

      ... so that the real person who would actually acquire your company that has budget, that would make a decision-

    30. MS

      Mm-hmm

  7. 12:05 – 13:25

    Big-company M&A incentives: buy low, look brilliant, don’t overpay

    1. DC

      And one other aside here. What's funny is the way someone that's good at corporate development is evaluated in a very similar way to a VC.

    2. MS

      Mm-hmm.

    3. DC

      Let me explain what I mean by that.They want to buy things very cheaply that end up being worth way more than they bought them for.

    4. MS

      [laughs] Yeah.

    5. DC

      And I think sometimes fo- founders are like-

    6. MS

      Yes

    7. DC

      ... "Oh, these, these big companies just have so much money. There's money everywhere, so they're just gonna give me some of that, right?"

    8. MS

      No.

    9. DC

      Like, "They have money. I should have some." And they're shocked that that is not the mentality. [laughs]

    10. MS

      Yeah.

    11. DC

      And if you think about what are, what are some of the best corporate development deals of all time, Google buying YouTube.

    12. MS

      Yes.

    13. DC

      YouTube is worth a lot more-

    14. MS

      Yes

    15. DC

      ... than they bought it for.

    16. MS

      Bought it for a billion.

    17. DC

      Facebook buying Instagram. Instagram is worth a lot more than Facebook bought it for.

    18. MS

      WhatsApp as well.

    19. DC

      WhatsApp. And so those, you know, the acquirer paid a lot of money, but the terminal value of those businesses, the corp dev people look like geniuses.

    20. MS

      Instagram i- i- is worth-

    21. DC

      Is Facebook

    22. MS

      ... more than Facebook. [laughs]

    23. DC

      Yeah. So it was a great deal.

    24. MS

      Yeah.

    25. DC

      And conversely, paying some random startup a lot of money that doesn't-

    26. MS

      Can't be that

    27. DC

      ... that can't be that, they would get fired very quickly if that's the kind of M&A they would do.

    28. MS

      Exactly.

    29. DC

      And so again, the, the, the, the point that the founders need to understand about corporate development is they're looking to buy low, sell high.

    30. MS

      Yeah.

  8. 13:25 – 14:26

    What drives large, lucrative acquisitions: clear ROI and distribution leverage

    1. MS

      Yes. Well, I think this is an interesting point, and, and, and you're bringing into this. We talked about acqui-hires. Let's talk about these deals that are big.

    2. DC

      Yes.

    3. MS

      Big acquisitions. How do people make a lot of money in acquisitions? And I think that you nailed the point so well, which is because I can underwrite that for whatever we're paying you, our ROI-

    4. DC

      We're making way more money

    5. MS

      ... is gonna be fantastic. [laughs]

    6. DC

      Right? [laughs] Like...

    7. MS

      Now, sometimes that's because your product's doing really well and growing fast. Sometimes that's because the company buying you thinks that they can push your product better than you can.

    8. DC

      Yes.

    9. MS

      Like, um, most people don't know, but most of the products inside of the Google workspace, uh, whatever, their office competitor, I don't know what it's called now-

    10. DC

      Yeah

    11. MS

      ... were acquisitions.

    12. DC

      That's exactly right.

    13. MS

      And it was like, "Yeah, we can bundle these things and sell them for a lot more."

    14. DC

      Well, and Cisco is famous for this-

    15. MS

      Yeah

    16. DC

      ... where they would acquire a company so their sales team could cross-sell it to their existing customer base.

    17. MS

      Right.

    18. DC

      So they're like, "We can buy it for X dollars."

    19. MS

      Yes.

    20. DC

      "We can grow it much faster with our sales team."

    21. MS

      Yes.

    22. DC

      "And so this is a smoking deal."

    23. MS

      Yes.

    24. DC

      Again, like, they're, they're in the business of making money here.

  9. 14:26 – 16:23

    Uniquely strategic buys: when one CEO ‘backs up the truck’

    1. MS

      Another thing, though, that you brought up is the idea that, like, sometimes a big acquisition happens because a company is perfectly placed in the roadmap of where a much larger company wants to go. Riff on that one.

    2. DC

      Yeah. So look, I'm still close to a lot of very late stage companies.

    3. MS

      Yes.

    4. DC

      And they actually bug me all the time asking me to help them find companies to buy.

    5. MS

      Yep.

    6. DC

      And what they're not saying is, "Dalton, who are some struggling startups that you know with bad technical teams? We really wanna give them lots of money."

    7. MS

      Yes, yes.

    8. DC

      They're instead saying, "Dalton, who are the most talented technical teams that you know-

    9. MS

      Mm-hmm

    10. DC

      ... who would be interested in acquisition-

    11. MS

      Mm-hmm

    12. DC

      ... with expertise in X?"

    13. MS

      That's still a acqui-hire. So I-

    14. DC

      You're right. Okay, you're right. So let, let me, let me... Okay, Barry.

    15. MS

      Yeah.

    16. DC

      It's that, plus-

    17. MS

      [laughs]

    18. DC

      ... it's a business that they have a very clear line of sight-

    19. MS

      Yes

    20. DC

      ... can make their business better.

    21. MS

      Yes.

    22. DC

      And basically, the more desperate the acquirer is-

    23. MS

      Mm-hmm

    24. DC

      ... and the more they feel that it's existential for their company-

    25. MS

      Mm-hmm

    26. DC

      ... the more likely they'll pay lots of money.

    27. MS

      Yes.

    28. DC

      And so what's in the news right now, this week when we're recording this-

    29. MS

      Mm-hmm

    30. DC

      ... is Cursor, and it is clear that Elon decided that it is extremely strategic for xAI and Grok to have better coding models. I think that's true.

  10. 16:23 – 17:07

    You can’t optimize for being acquired—only for building something great

    1. DC

      Yeah. And it's basically impossible to do this on purpose. As a quick aside, there was not a universe where the founders of Cursor would've been like, "Well, Elon is gonna buy us."

    2. MS

      Yes.

    3. DC

      Think about the chain of events-

    4. MS

      No

    5. DC

      ... for Elon acquiring Twitter-

    6. MS

      No, no

    7. DC

      ... and then him starting xAI, and then for coding agents to take off, and then-

    8. MS

      No.

    9. DC

      It's like the butterfly effect.

    10. MS

      Yes.

    11. DC

      And so as a founder, there's really nothing you can do to optimize for that other than make something-

    12. MS

      People want. Yeah, build a good company. [laughs]

    13. DC

      ... that is frighteningly successful.

    14. MS

      Yeah, exactly. [laughs] Exactly.

    15. DC

      Like-

    16. MS

      Yeah

    17. DC

      ... like, there's no, there's no universe-

    18. MS

      [laughs]

    19. DC

      ... to increase the odds of that happening.

    20. MS

      You can't hack that.

    21. DC

      Right?

    22. MS

      You can't hack that.

    23. DC

      And again, that's why I think it's a good case study.

  11. 17:07 – 19:20

    Public-company motivation: stock price, revenue growth, and ‘moving the needle’

    1. MS

      Yeah. I think the other thing that people don't understand is, um, the motivation of the CEO, and therefore the management team of a public company. And I think I didn't really understand this well either. I would've thought making a business leaner would be rewarded. I would've thought, "Okay, like, if we can run this company with, uh, 700 people instead of 800 people, we should do that immediately." That would be rewarded in the market. What I've come to understand is the market rewards revenue growth. And one reason why you see a lot of companies out there that maybe have more people than you would assume is because they're trying to leverage those people [laughs] to create revenue growth. The math that I was told by an old board member was revenue growth is valued by the market 3X more than cost savings. The other thing that happens with revenue growth if you do it well is it's compounding.

    2. DC

      Yes.

    3. MS

      Cost savings tends to be a step function. "Oh, we- we're, we're cutting our staff by 50% every year until we're one person," that doesn't really happen. When you have to model out in your mind how you're valuable to a new company, you've gotta think, "Are we making enough money, and is that amount of money growing fast enough?"That if it were added to the sales effort and to the totals for that company buying us, it would make a difference to public market investors.

    4. DC

      Yeah. That's what's crazy is a l- for a lot of the big companies, the stock price, they wanna make acquisitions that raise their stock price.

    5. MS

      Yes, yes.

    6. DC

      And it has to move the needle in a bunch of different ways.

    7. MS

      Yes.

    8. DC

      Right?

    9. MS

      And I think what is not understood as well is that at these companies, the CEO on down, and all the shareholders, they're all motivated by the stock price movement. Like, they're not making their money on their salaries. They're making their money on the stock price movement, and the stock price is a imperfect but as good as we get estimate on how much more money this company will make in the future. So once you start understanding that motivation, you might see, well, okay, even if you have 50 million in revenue, but it's only growing 5% year over year, some company doing a billion dollars in revenue doesn't move the needle. And, like, if you were a public market investor, you'd be like, "Great, you, you have $50 more million in revenue, but how much do you expect that to grow? Not much."

  12. 19:20 – 22:38

    Practical tactics for getting acqui-hired: networks, champions, and speed

    1. DC

      I think we should try to share some specific tactics-

    2. MS

      Yes

    3. DC

      ... and misconceptions on how to actually get acquired here. So we're gonna give you all the goods.

    4. MS

      Yes.

    5. DC

      To start with-

    6. MS

      Acqui-hires to start?

    7. DC

      Yeah, let's start with acqui-hires.

    8. MS

      Great.

    9. DC

      So how... Let's say that I'm a founder watching this video, and for whatever reason, maybe I'm just curious, Michael. I don't wanna admit that I wanna be acqui-hired, but I'm, I just wanna know more. How does one do that?

    10. MS

      One thing that I'll say is oftentimes what a founder needs to do is they need to talk to people in their network, whether that's customers or friends at potentially interesting companies. And oftentimes what they have to do is kind of-

    11. DC

      Be upfront

    12. MS

      ... be upfront.

    13. DC

      Yes. [laughs]

    14. MS

      And, like, there is no, like, "Oh, let me, like, backdoor my way into someone potential..." Like, "Oh, let me just talk to you and then you, it'll be your idea to buy us." It's like, no, you gotta be upfront. And I think that a lot of what your job here is, is to get through options quickly.

    15. DC

      Yes.

    16. MS

      You need to understand what the real field of interest is versus the kind of fake field of interest is.

    17. DC

      'Cause it's gonna drag on forever if you don't do that.

    18. MS

      Exactly. So it's talking to your friends. It's talking to your potential customers. Even better, if you've got customers who could champion a deal, um, or who are one step removed from somebody who could champion a deal, communicate to them that you might be interested in acquisition and ask them what are next steps and would they be interested.

    19. DC

      The biggest misconception I see here is that founders believe that strangers might actually buy their company.

    20. MS

      Hard, and especially hard when you're reaching out to the stranger.

    21. DC

      Yes. They think they can, like, cold email-

    22. MS

      Very hard

    23. DC

      ... or get a warm intro-

    24. MS

      Yeah

    25. DC

      ... from someone random.

    26. MS

      I will give a plug to YC here. I think YC, and there might be other communities like this, but I think YC is interesting where I do think a founder of a YC company can reach out to a founder of another YC company.

    27. DC

      Yeah.

    28. MS

      And it is kind of a warm intro.

    29. DC

      Yeah.

    30. MS

      Yeah. And, and so, like, one of the reasons why we see so many talent acquisitions within the YC network is, like, you know, you can email Parker and be like, "Hey."

  13. 22:38 – 24:24

    Avoiding ‘fake offers’: time-box the process and force clarity

    1. DC

      And that makes me think of another really common misconception that gets founders tweaked out. I think Justin once called them, like, fake acquisitions or bullshit acquisition offers.

    2. MS

      Yeah.

    3. DC

      Let me explain what I mean. If you're in a meeting with someone and they say, "Oh, you know, we'd love to acquire your company," is that an offer, Michael?

    4. MS

      No, no, no.

    5. DC

      [laughs] How often do people say things like that?

    6. MS

      No, no. It, it's so easy to say, "We're really... Yeah, of course we're interested. You should consider us interested."

    7. DC

      Yes.

    8. MS

      [laughs]

    9. DC

      And so the thing to understand is casual comments are not an offer.

    10. MS

      No.

    11. DC

      And that to go from words-

    12. MS

      Mm-hmm

    13. DC

      ... into a piece of paper-

    14. MS

      High failure rate

    15. DC

      ... high failure rate and very, very, very hard.

    16. MS

      Very hard.

    17. DC

      Many steps.

    18. MS

      Many steps. And, uh, and you bring up this a lot. It's important as a result to time box this-

    19. DC

      Yep

    20. MS

      ... experience because you could have a set of interesting parties for three years-

    21. DC

      Yep

    22. MS

      ... and never get you to a written term sheet.

    23. DC

      Yep.

    24. MS

      So oftentimes by time boxing, by saying, "Hey, I'm gonna do this for two months or do this for three months," you should expect at some point having to say to some of these folks, "Are you in or are you out?" And I think that's always scary for founders, but it's, once again, we gotta discover the real market. 'Cause, like, do you really wanna spend six months having meetings with a bunch of people who never wanted to buy your company? [laughs]

    25. DC

      No.

    26. MS

      You're just, like, wasting your life. [laughs]

    27. DC

      Right.

    28. MS

      It's not worth it. And by the way, the overall success rate for acqui-hires is low.

    29. DC

      Yes.

    30. MS

      So, like, your job here is really to assess as quickly as possible, is there any interest?

  14. 24:24 – 26:07

    Big-deal complexity: bankers, external shocks, and emotional whiplash

    1. MS

      Like, if there is mutual interest, usually the company's early on, there isn't as much diligence. Maybe it's a month of diligence and things can go. Um, bigger deals. Bigger deals are tricky because they come in different flavors. Sometimes bigger deals involve bankers, smaller deals almost never involve bankers.

    2. DC

      Definitely not.

    3. MS

      Um, but if we're talking about acquisitions that are in the 500, a billion, a billion plus, oftentimes there's advisor involved. Um, oftentimes there's a degree of a company is interested, and so we're gonna kinda, like, check if others are interested.

    4. DC

      Yeah.

    5. MS

      You know? Like, so someone's kinda triggering the interest, so, like, the banker can help you circle in with others. Oftentimes weird shit like how the acquiring company is doing in the market at this point.

    6. DC

      Totally.

    7. MS

      Like, what the in- Like, we've heard a famous deal. The, the Facebook deal got blown up because Yahoo had a bad quarter.

    8. DC

      Yeah.

    9. MS

      And so, like, it's like there are more-

    10. DC

      Well, and the Figma thing. Remember they got acquired? [laughs]

    11. MS

      Oh, god. Yeah. Unacquire. The government can unacquire your company it turns out. [laughs]

    12. DC

      [laughs]

    13. MS

      Like, have guns, can do whatever you want. So there are a lot more external factors than an acqui-hire where it's, like, a limited budget and, you know, it's done really fast. I think the other thing that happens for the bigger acquisitions that's tricky for founders is, um, they can also fall through. Without giving too much details, like, I've worked with this a bunch of times where folks are like, "I am internally processing the idea that I might make $100 million," and then no deal happened.

    14. DC

      Yeah.

    15. MS

      And now I am-

    16. DC

      It's bad for morale

    17. MS

      ... I am sitting in my startup feeling like this.

    18. DC

      [laughs]

    19. MS

      And you gotta think about what that's like to be like, "I think I made it. I'm right back where [laughs] I was a month ago." That happens a lot, too.

  15. 26:07 – 31:19

    How to increase acquisition value—and when shutting down beats an acqui-hire

    1. DC

      So maybe one other thing I'd like to talk about-

    2. MS

      Sure

    3. DC

      ... is what can you do to increase the chance your startup is acquired or is more valuable? Again, this is, we're just telling the secrets here.

    4. MS

      Yes.

    5. DC

      So I actually have an answer. Knowing so many folks that acquire companies-

    6. MS

      Mm-hmm

    7. DC

      ... they really care about who is on the engineering team-

    8. MS

      Mm-hmm

    9. DC

      ... what their LinkedIns say, and they will, like, create scores of how strong your engineering team is relative to others. And the more that it looks like to a third party that your startup has hired excellent people that are better than the people that work at the acquirer... Think about the acquirer. They know what kind of people work there.

    10. MS

      They can get. Yeah. [laughs] Yeah.

    11. DC

      And so if they're like, "Oh, man, this startup has, like, way better people than work here"-

    12. MS

      If we acquired you, you would be amongst our top 1% of engineers

    13. DC

      Right? Like, if, if that's what you're doing-

    14. MS

      Yes

    15. DC

      ... the, the market is real.

    16. MS

      Yes.

    17. DC

      Versus if they look at your startup and you're like, "The people that work at this startup are much... They would never pass our technical screen," they're not gonna acquire your company.

    18. MS

      Yeah.

    19. DC

      This makes sense. So you, you really have to be brutally honest if you wanna do a self-assessment here-

    20. MS

      Yes

    21. DC

      ... about what the relative strength of your engineering team is-

    22. MS

      Yes

    23. DC

      ... and the quality of the founders from a technical perspective. If you have, like, CS PhDs who used to work at, you know, foundation labs-

    24. MS

      That's a different profile

    25. DC

      ... uh, this is one of the reasons, by the way, that those companies raise at such high valuations-

    26. MS

      Yeah

    27. DC

      ... is because-

    28. MS

      Yes

    29. DC

      ... even if it doesn't work, someone will acquire them to get all the PhDs doing ML research.

    30. MS

      Yes. There's almost a floor.

Episode duration: 31:20

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