Let's say that you have identified an amazing startup, you've been working with the team and everything is going great. But now you are probably thinking to go a step beyond investing in this company, so let’s discuss acquiring this startup. The main question you should ask yourself is – What are the key things you need to do?
Look at the Business Model
First of all, I will assume that you have decided that your startup is valuable enough to acquire, so I am not going to worry about that. What I am going to worry about instead, are the things that could potentially trip you up. The first thing is, does the business model of the startup work fit within your company? For example, if a company is a platform company and you acquire it, will your competitors be willing to continue working with that platform? So, you should really think about what is your thesis for acquiring the company and does this acquisition change that thesis?
The second thing is to think about is what is going to happen when you bring the folks at the acquired company into your company. It is very important to think about cultural compatibility. For example, LinkedIn is acquired by Microsoft but they operate relatively independently which is a way to solve this issue. But you still have the other half which is how are the people inside your company going to feel about there being a startup with different rules and where people might have a different compensation system or have cooler stuff
So, I want you to think very carefully about how it is that you're going to actually make it so that people inside your company feel good about working with the acquired company. The final thing to think about when acquiring the company, is just to ask yourself, what am I trying to do here? Does it actually make sense to acquire this company? Acquiring startups can be incredibly powerful if you just make sure that you are asking yourself the key questions before you do so.
To support community members we have partnered with GSA Community Expert Jennifer Fondrevay, an experienced veteran of the corporate M&A process and author of "What Next?" to create a course about Managing The M&A Process Effectively. Check it out.