The Big Acquisition
Do you fantasize about working for a startup? The excitement, the perks, the big payout after the big acquisition?
I’ve worked for a half-dozen startups, and I’ve survived three acquisitions by Fortune 500 behemoths at Rare, Ltd. Reflexive Entertainment, Inc., and Oculus VR, Inc.
Every time, it’s wild. The one thing you can rely on happening is a great deal of turmoil. Really, a lot of churn and so much confusion bubbling just beneath the surface every minute of the process until the acquisition and transition are complete...and then over the next six months or so until all the changes have settled out and everyone knows what's what. Not that it’s all bad - it is exciting, invigorating, and overwhelming.
The Acquisition is Nigh
Once the team gets wind of a possible acquisition, you’ll find small knots of employees whispering emphatically about big things. Conversations will halt abruptly as you approach, or else you’ll be dragged aside by someone who wants to know if you know what’s going on, and who's doing or getting what.
After years of struggle to bring the startup’s vision to life, there's suddenly a palpable sense that the payoff you dreamed of when you joined this amazing team might actually become real.
Of course, all the excitement is continually underscored by the whispering about who’s getting what. How much will the founders get? Who got in before what round of funding? Who might be cut out or screwed? Do we rock the boat or stay quiet and protect our share? Who came in late but negotiated hard and is getting what others might think is an unfair lump? Is this deal real? Is it really going to close, or is something or someone going to wreck it during due diligence? Everything is super dramatic and mostly unhelpful – the worst of group politics and the office rumor mill all rolled into one hyper muddle.
Some of the team will be caught up wishing they’d negotiated more options, some just want to get on with work, and a few cynical, or ridiculously optimistic, souls will be fighting to kill the whole deal. Employees, and founders, will start fantasizing about paying off debt, buying that dream car or house, or the robots and lasers and 3-D printers and linear accelerators they’ve been wanting forever (as some of us do).
Then, What Happens
Everyone, deep down, is concerned about how their small, dynamic startup – the special place they sweated, and fought, and burned midnight oil to bring to life – is going to change...or die. Deep down, they fear their wonderful creation will be sucked into a merciless corporate maw where all creativity will be ground to naught.
Management from both the acquiree and acquirer will be working hard to dispel the fear that corporate overlords are descending to dominate the startup and ruin the dynamic culture that made the small team mighty in their unique way. They expound about how this opportunity will provide more resources/tools/technologies/negotiating power, and catapult the startup toward the mega-success the team has been working so hard to achieve.
It's not that they're lying, mistaken, or wrong...it's just that one way or another, trust me on this, a lot is going to change. The change may be gradual, like the proverbial frog boiled in a pot, or it might be a complete hulling out of the management and the heart and soul of the organization, but change is inevitable. Folks who run companies that acquire other companies aren’t doing it to be nice, they want something.
If what they want is your collective knowledge and experience, then the people who were the driving force behind your startup will be pulled apart and shuffled to the area where their expertise is needed.
If what they want is your team finishing a project or product, they’re going to want insight into how their investment is performing...stat. You can take odds on whether your unique work culture is a perfect match to theirs, but chances are slim. There will be misunderstandings about the way work is done, differences of opinion on the end goal, disagreements about the mission or how you’re going to get there. After some disputes, you’re likely to have some pressure applied to “fix” things, get back on track, and align with the new vision, their vision.
Don’t get me wrong, sometimes this is a good thing. Sometimes startups have great vision but their execution needs some refining or direction. Process input from a well-run organization is the reason we enjoy some products begun by startups today.
But, whether it’s good or otherwise, things are going to change.
And, whether you were acquired for $10 million or $2.3 billion, an acquisition may bring nothing but a lingering sense of, “that’s it?”
End Game
And then the deal closes, nice new cars start appearing in the parking lot. Life goes on for everyone whether they made out like bandits or were among those who are sure they were screwed in some way.
Inevitably, the startup culture will begin to shift – some people will “grow up” and get invested in the new corporate org, others will move on to the next exciting, frenetic, optimistic startup to recapture that "anything is possible" feeling, and some will just keep on keeping on, adapt and do their good work, as things change around them.
I’ve done all three.
If you'd like to see some amusing and surprisingly realistic portrayals of what it's like to work for a tech start-up and survive an acquisition, I heartily recommend watching season one of Silicon Valley, which has many spot-on observations - I know some people who cannot or will not watch the show because it hits too close to home. If you’ve had experience working through a startup acquisition, I’d love to hear your perspective in the comments. Or if you have any questions, I’ll answer as best I can.
