The Marker Guide to Getting Your Startup Acquired

Get a lawyer involved from the very first moment a piece of paper is placed in front of you

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Some entrepreneurs spend way too much time worried about the endgame. Others get an acquisition offer dumped into their laps and have no idea what to do next.

I’ve been acquired six times— the last two at companies I led. One of those companies was acquired by a private equity firm and the other by a corporation. I’ve also consulted several startups through the acquisition process.

Last week I got a message from a founder who got her first hint at acquisition interest. It was nothing more than a request for a meeting, but you didn’t have to be a rocket scientist to read between the lines.

That moment is usually where the deal begins. So in response to her, I offered a step-by-step plan for how to generate and respond to acquisition interest.

Step 1: Figure out if you’re a threat

While a startup shouldn’t be focused on acquisition, you should definitely know who your potential acquirers are. They’re your incumbents and your competition, your customers and other corporate entities, and your partners and other large players in your space. If your startup is funded, this list should also include strategic corporate investors and private equity firms that play in the same space as your investors.

There’s no magic formula to make your company attractive to these acquirers. Your startup doesn’t necessarily need a ton of revenue to get acquired, but the more revenue it’s generating — especially recurring revenue — the higher the valuation of the company and the better the offer.

One thing is absolutely necessary, however: You’ll need to have market share because your company needs to be a threat. Incumbents want to take threats out. Corporations want to use threats as a competitive edge. Private equity firms want to turn threats into promises and flip them or take them public.

Ask yourself if your startup is a threat. If not, forget about acquisition, and keep hitting the accelerator.

Step 2: Build relationships with potential…