Startups feel like a race against the clock, because they are. The trick is to extend a startup's runway (or as one of my investors put it, "oxygen in the the scuba tank") long enough to become successful. This means creating the right team, finding product/market fit, executing flawlessly, and either becoming profitable or raising enough money to keep oxygen in the tank until you do (or until you get acquired trying).
One thing I've firmly come to believe after doing several startups is that a startup doesn't die until its founder(s) give up. By that I mean, there's always one more thing that the founding team can do to eek a bit more oxygen from the tank, even when things look hopeless. But when a founder gives up, there can still be money in the bank and it won't matter; the startup is done. It kind of feels like the tail wagging the dog, in a way -- startups succeed from pure, raw determination of the founders as they race against time.
What got me thinking about writing this post, though, is an awesome blog post I read about putting time in perspective. So often in startups it can feel like time's running out that it's refreshing to think about time on a grander scale. Here's an infographic from that article that really does put things into perspective. A great quote from that article is:
"Humans are good at a lot of things, but putting time in perspective is not one of them."
While I can't speak to the terms of our deal with ShareThis, I'll use the experience to walk you through the general framework of a deal process, so you understand the multiple steps involved. What I'm going to share is not a reflection of how our deal went down -- I'm pulling from various deals I'm personally familiar with or from accounts I've heard from other entrepreneurs who have also sold.
The first thing I want to highlight is the stress that a deal puts on a startup. Uncertainty kills innovation, and for that reason, if you think you want to sell, it's critical that you get the process done super quickly. Thirty days from start to close is an ideal (although likely impossible) goal to shoot for. Ninety days is a reasonable and achievable goal.
It's also likely that the acquiring company won't be in as much of a hurry as you are: Getting the deal done is likely a secondary priority for them as compared to running their main business. For the startup, it defines the future of the company -- or at least, it's one major possible outcome with huge implications for the startup. There are a few exceptions on the acquiring side -- for example, Facebook is known for moving blazingly fast in deals as a part of its strategy to keep startups it's interested in from being scooped by other acquirers. As I assemble best practices for getting deals done, speed is at the very top of my list.
Next, from the startup's perspective, is evaluating alternatives. This is where someone like Ezra is invaluable. As I mentioned in this post, Ezra Roizen is a banker, but he's different from all the others I've met. Ezra is a scrappy "get it done" deal magician with a small team and a huge rolodex. He can get a temperature read from someone (usually either the CEO or a board member) at any potential acquiring company you'd like to speak to. It'll be up to you to decide what companies you want to target, and then Ezra can take it from there.
I mentioned last week that I had a deadline which I was working towards. I'm going to explain a bit more about this because a) it's consuming my life these days and b) I have the feeling this is going to be the beginning of something big. If it is something big, I think it might be interesting to hear it from the beginning.
What is Y Combinator?
Y Combinator is a "startup accelerator". Since that doesn't mean much, I'll explain how it works. You and your cofounder apply to Y Combinator. If they like you and your startup idea, they give you around $20k in exchange for a small piece of your company.