What happens after the ink dries on the agreement to sell your company?
That was the topic of a panel discussion at a Communitech breakfast event Wednesday, aimed at small- to medium-sized companies.
Steve Woods, Engineering Director at Google Canada, moderated a panel of three Waterloo Region tech founders: Joseph Fung, Kerry Mueller and Mate Prgin, who shared a diverse set of post-acquisition experiences.
Woods, who is no stranger to the acquisition process, spoke from both sides of the table. In the late 1990s, he co-founded Quack.com, which was acquired in 2000 by America Online. In 2012, he was involved in Google’s acquisition of BufferBox, a Waterloo Region startup which was shut down eight months later.
During the 45-minute discussion, the three panelists talked about what led to their companies being acquired, the role money played in the decision-making process, and what happened to their founding teams after acquisition. They also shared advice.
Prgin has been down the acquisition road a few times now.
He was part of the fallout of Cisco’s $554-million acquisition of PixStream in December 2000. Cisco shut down PixStream four months later, and a week after that, Prgin co-founded VideoLocus, a leading video compression tech company, which was acquired by LSI Corporation in November 2002. He is now President and CEO at Avvasi, which makes tools to ensure and improve the quality of video viewed on mobile devices.
When LSI acquired VideoLocus, the intention was to use the money to continue developing VideoLocus’ product, Prgin said. Instead, he and his team ended up working on LSI’s legacy system.
To add salt to the wound, the executive who sponsored the acquisition left after a year to start his own company, which executed on VideoLocus’ business plan. That product now powers the technology behind GoPro.
Prgin also noted the difference in perception between sold and bought. Nothing looks more desperate than a company holding up a figurative “for sale” sign, but a company that creates demand will look attractive enough to be bought.
Although money was part of their decisions, fit was just as important for the panelists.
Fung, who co-founded TribeHR and is now VP of HCM (Human Capital Management) Products for its acquirer, NetSuite, characterized the 2013 acquisition as a best-case scenario.
He cited the cultural alignment of the two companies and his ability to report directly to NetSuite’s CTO as factors in the acquisition’s success.
TribeHR had set out to build a company that put a priority on the quality of its operations, which made the deal smoother for both companies, Fung said.
Still, he was quick to emphasize how stressful the process can be, when juggling what’s best for employees and customers, not to mention the selling price.
He advised entrepreneurs in the audience to focus on simple things, like having a good support system, and to be rested and well-fed.
Similar to Prgin’s VideoLocus, ONE-EIGHTY CORP started in the early 2000s after the burst of the dot-com bubble, a period considered a startup wasteland because venture capitalists weren’t investing in tech companies.
Mueller, who co-founded and boot-strapped the company with her husband, A.J., served as its president until ADP (now CDK Global) bought it in October 2013.
Mueller and her husband retired 10 months post-acquisition.
The decision process to join ADP didn’t hinge on money, but rather how well Mueller’s team, which she said still felt like a startup, would fit into ADP, and if there was a future for the product she had built.
She recognized that for most employees, the announcement that you’re being acquired comes as a shock, and that founders should provide support during the transition.
Despite their varied experiences, the panelists earned nods, laughs and claps from the audience as they covered the various issues that can arise during acquisition.
Cameron Hay, a startup mentor and former Communitech executive-in-residence, will lead Communitech’s next breakfast on March 4, which looks at the pros and pitfalls of partnerships.
