Facebook buys Instagram.
Google buys Meebo.
Bing acquires Qwiki.
And a whole lot of other companies are buying and selling to each other. Startups are often the pet projects of their founders and co-founders. While a lot of startup companies these days were built for the sheer purpose of getting rich by selling their services to highly profitable business leads and then selling big to multinational companies, there are still those startups which were built out of the desire of the founder to make a difference, share an innovation, to make the lives of their sales leads easier or fulfill a dream. If your startup falls in the latter category, what do you do when an offer to buy you out presents itself?
Why you should sell
Smart Bear was a fast rising IT company, with growth percentage viewed at 100% annually and had no problem finding business leads. However, on December 2007, CEO Jason Cohen decided to sell the company, to which a lot of negative responses were made. In Cohen’s blog post, he explained why selling out was the best decision he could have made on that matter. His point was very simple: sell the company while it is profitable, as long as the offer was equal the value of the company.
You should decide right from the beginning how long you plan to direct your company. Are you willing to put up with all the shifting market trends, the telemarketing calls, the competition, appointments with clients, the complains of irate clients, difficult employees, and the complications that all this poses with your family life? Running your own business is undoubtedly a rewarding venture, but for how long should you run it?
Cohen certainly pointed out a good reason to sell out—his end goal had always been to be “Rich” and the aim for the company had always been an acquisition. Though he certainly enjoyed the perks of being “King” and the satisfaction of providing the best quality service for his business leads, he didn’t lose sight of his goal, and it made the decision making much easier. He has since been able to enjoy spending as much time as he wants with his family and leading a new startup to success.
Piknik CEO Jonathan Sposato has written a great write up on Geekwire.com about his views on selling a startup. The article focuses on 4 often overlooked reasons that a CEO should consider when another company offers to purchase his startup.
- Unconventional Reason #1: Where to park your money
- Unconventional Reason #2: Your life chunk-size
- Unconventional Reason to #3: Team Fatigue.
- Unconventional Reason #4: When your wife [or spouse] wants to sell.
When you look at the reasons pointed out by Sposato and the reasons given by Cohen, it is clear that selling a startup may be initially about the money, but in the end, it’s all about how doing so will benefit your family in the long term.
What will be your decision when that time comes?