On Receiving the First Real Offer from a Potential Acquirer

Last week I was talking to an entrepreneur that had just received his first real offer to sell the business to a potential acquirer. As an entrepreneur, it’s easy to think selling a startup to a strategic is a fairly routine and common part of the venture world. Only, after being in the game for 20+ years now, I know just how rare it is. In fact, for a “hot” startup in the growth stage ($5M+ run rate) and beyond, a real acquisition opportunity comes around every 3-4 years. And, that’s only after getting to scale with everything else in the business doing well (renewal rates, growth rates, size of addressable market, etc.).

When the first real offer from a potential acquirer comes in, it’s often an emotional experience. Here are a few thoughts:

• Don’t Start Spending the Money
  It’s easy to get dollar signs on the brain and think of all the ways the money can be spent. Stop right there. Fight the urge to think about how the money will change your life as most acquisition offers don’t turn into exits.
• Stay the Course
  Getting a quality acquisition offer is incredibly distracting. Should we sell? Should we say no? How will my life change? What will our employees think? Is it really going to happen? The questions and thoughts are endless. The best thing to do is stay the course and actively isolate the noise.
• Find Alternative Options
  With so much money out there chasing startups, work to create an auction process with multiple parties. Reach out to the private equity firms that have been courting you and see what they’re offering. Secondary stock sales are common now, so there might be an opportunity to sell a smaller piece for financial security and not have a full exit.
• Ask For Help
  Seek out advice and counsel. Find a mentor or advisor that’s been through this experience and lean on them to talk through the barrage of questions. Selling your startup is much more difficult emotionally than it seems.

Receiving a real acquisition offer is a major milestone for many entrepreneurs. But, at the same time, it’s also incredibly distracting. Get help, don’t start mentally spending the money, stay focused on the business, and find alternative options.