Two years ago Vonage bought Vocalocity for $130 million to expand into VoIP for businesses. When talking to the founders of Vocalocity several years prior to the exit, I learned that their primary driver of growth in the early years was helping third-party VoIP lead generation sites get better at generating leads, which in turn resulted in more qualified leads for Vocalocity. Then, six months ago, I was talking to an entrepreneur that was about to complete the acquisition of a low single-digits millions of revenue lead generation site so that they could be the exclusive recipient of leads for his non-tech startup.
When’s the last time you heard of an entrepreneur buying another company — a lead generation service or marketing agency — purely to improve the lead generation/marketing side of things? Here are a few thoughts on the idea:
- Building a great lead generation machine is incredibly hard and time consuming, making an acquisition a potential quick solution to getting it done
- Many niche lead generation sites and marketing agencies don’t have enough scale or market size to be major acquisition targets, making them more favorable/affordable to ambitious entrepreneurs that are looking to grow faster
- Expertise and talent in online demand generation is tougher to find than many people expect, making the staffing element an enticing component
Buying another company just to help with lead generation doesn’t come up too often, but it happens, and entrepreneurs should consider all options.
What else? What are some more thoughts on the idea of buying a company just for lead generation?