Published on August 27th, 2013 | by Jose Vasquez5
3 Focal Points of Startup Tech Companies that Get Acquired
If your goal is to ultimately get acquired by a more established or bigger tech firm, you need to have these three key qualities.
There are a lot of exit strategies for startup tech companies, all of which are perfectly viable and carry their own definitions of success. For example, a tech company could grow steadily in one sector indefinitely. It could go public or partner with another company to increase capacity and expand into new areas of production. Or, like many startup entrepreneurs dream, your tech company could be acquired by a massive legacy tech company, possibly for hundreds of millions of dollars.
Marissa Mayer, relatively new CEO of Yahoo!, has been eagerly acquiring startup tech companies in an effort to expand and remedy Yahoo!’s current line of product offerings. This is a pattern characteristic of legacy tech companies searching for a new, fresh outlet. After reading about Marissa Mayer’s strategy, which is much like that of similar CEOs, I decided to compile a list of three essential qualities that startup tech companies need in order to look appealing to acquire.
- Young—but Not Too Young. Once a startup has been around for several years, it becomes less appealing as an acquisition. But fresh startups are unlikely to get acquired as well. The “sweet spot” is somewhere in the middle—for tech companies who have had the experience of trial and failure, but are still new enough to have energy and momentum legacy tech companies need.
- Disruptive Technology as a Focal Point. Startups aren’t acquired because they enhance something a legacy tech company already offers. They’re acquired because of something they have that legacy tech companies don’t—disruptive or unique technology innovations.
- Appeal to Young Buyers. Most acquisitions are prompted by a desire for fresh ideas in a big company—and those fresh ideas are necessary for capturing the attention of young customers. The demographics rule doesn’t always hold true, but it is relatively consistent for many big tech companies.
Don’t build your business around a goal to become acquired, but these factors are still worth considering. Focus on building a stellar product with a backbone of steady revenue. The rest can come later.
The original story on Marissa Mayer’s approach to startup acquisition can be found here