Kathryn O'Day

Learn or die.

The essence of startups.

Is this totally melodramatic?

YES!

But also…I’m not wrong 😉

Learning, scaling with your company, and growing as a leader are essential components of every successful startup story.

No one cares more about your company than you!

But the skills you needed for 0 to $1M are wildly different than the skills you need from $1M to $10M, then $10M to $50M, and beyond.

Can you grow and learn fast enough?

There’s lots of ways to learn. But do you want to know what the best CEOs do??

COACHING! (Or, as I like to say “professional mentorship.”)

I’ve been lucky enough to work with a variety of coaches over the years. They’ve been instrumental in my personal and professional development.

If you’re looking to get started or wondering what to look for or consider, here are my top 7 suggestions!

1. Identify a coaching style that works for you.

It may take some trial and error. That’s okay! Here are some different considerations, styles, and strengths I’ve seen.

• Do you want tough love or positivity?

• Do you like the Socratic method (question asking) or direct advice?

• Do you want lots of structure or templates? Or something more fluid?

• Do you want a peer group as part of 1:1 coaching?

• Do you need someone on-call or only for scheduled sessions?

• Do you like strong intuition or more facts and figures?

• Do you want someone who can help through their network?

Personally, I realized that I do not respond well to tough love. Call me a fragile Millennial but I am critical enough of myself, I don’t need anyone else piling on. I do best with a style that’s uplifting, highly intuitive, understands sport, and strong at reframing and analyzing self talk.

But everyone is different!

I know CEOs who love being told they are wrong or want a “punch in the face” (metaphorically of course).

This is why coaching is so personal and varied.

2. Understand your aspirations.

Something I’ve noticed…on some level, you want to be like your coach. Maybe not in all ways but there is a skill set or knowledge that you’d admire and want to learn. Can you identify it?

I’ve also seen a lot of success when someone finds a coach “like them” in meaningful ways.

Maybe it’s someone from your hometown, built a company in the same industry, a similar career path, same gender or ethnicity, a fellow wellness nerd — whatever makes you feel:

They “get” me.

3. Get a recommendation from a peer. Or pick someone you know fairly well.

Peer recs are the best.

I have worked with people I’ve found randomly on the internet or met (1x) at an event but those did not last.

My favorite coach was someone I knew before they became a coach. I’ve also had peer recs that didn’t work out, but I could still acknowledge they were very good just not a fit for me personally.

If you think you don’t know anyone who is getting coached…you’re wrong! Lots of people have coaches, it just isn’t talked about much.

Ask around, starting with the people you admire most. If they don’t get coaching, they probably know people who do.

4. Go with your gut.

There’s no “right” coach. It’s kind of like a life partner — there’s someone for everyone!

What one person loves may be your worst nightmare.

If you’re deciding between a few options, pick someone you like and are excited to talk with. That is a good, easy sign for fit. Don’t overthink it or make a pro/con list!

I also think it’s valuable to work with the same coach as other people on your leadership team.

Craig Hyde and I worked with the same coach at Rigor and it was very helpful for alignment.

5. Decide who will fund.

It’s normal for coaching to be a company expense. And it never hurts to ask!

It’s (usually) an excellent use of professional development funds, especially in a startup where folks are “figuring it out” and may not have a lot of senior leadership to learn from.

Investors often want founders to get coaching! Also true for high potential team members.

If company budget is tight, paying out of pocket can be worth it.

With the right coach, you'll often see results like better job performance, new financial opportunities, or improved stress levels and life satisfaction.

6. Assess cost options and value.

Coaching engagements can range from $150/hr up to $1000/hr (or more).

Or it can be a retainer model of $1000 up to $10,000/mo (or more).

You can do trial sessions, pay upfront for a certain number of hours, and other flexible options. Most coaches will work with you (within reason) on packages and payment scenarios depending on your situation.

From what I’ve seen, price is not necessarily aligned with quality. It’s easy to think more expensive is better. Or more experience is better.

Coaching (like most things) is a skill that improves with time and effort — but also some people are more naturally coaches, helpers, talent extractors than others.

I think of it like hiring. Consider overall value.

Sometimes 2x the price = 10x the value.

But sometimes 2x the price = is 10% better (or worse). Whomp whomp.

Trust your instinct not the price tag.

7. Make a change if needed.

These things can happen:

• You worked with a great coach who just isn’t doing it for you anymore.

• You’ve learned all you could.

• You want to try a different style.

• You want to work on a different skill set than where this coach focuses.

• You realized their style doesn’t work for you after all.

Whatever the reason, it’s your life, your time, your (company’s) money.

Do what’s best for you!

It is normal and healthy to change coaches over time.

Professional runners switch coaches every few years. Fresh ideas spur growth.

Now, if you’re trading out coaches very often and it’s always “the coach’s fault”…this is a pattern to examine.

As my friend Betty says, “What’s the common denominator here? You!”

But if it takes a few tries to find a good fit or you’re ready for a change, go for it. Just make sure you’re learning (about yourself!) from each experience.

Have you gotten coaching? What worked for you? What do you look for in a coach? What advice do you have for someone interested in executive coaching?

I gave this advice recently:

Never get to 100%.

Counterintuitive, right?

• Don’t you want a high quality output???

• Isn’t perfection and attention to detail why Apple is such an amazing brand?

• If I put my name on something, I want it to be great.

I, too, have thought all those things.

Nevertheless, here’s my advice to startup founders:

Get the project, product, playbook, or initiative to 90-95% complete. Then stop.

In high school and college, I agonized over papers, editing and re-editing for hours.

In the startup world, I had to train myself to value speed over quality.

I had to leave things with occasional typos, inconsistent formatting, outdated or missing information, the wrong logo or brand color, the wording not quite right, and 100 other imperfections.

It pained me. And I did it anyway.

Why?

Maniacal perfectionism will sink your startup.

It will slow you down, burn you out, and keep you from learning quickly!

Here Are 3 Reasons To Avoid Perfection At Startups:

1. By the time you finish a project, it’s already out of date!

2. Your time is almost always better spent elsewhere.

3. “Shipping” is the fastest way to learn.

Following the 80/20 rule (software developers and bloggers can vouch for this), you spend 80% of your time on the last 20%.

So if you can get that sales presentation or new employee onboarding plan to 90% in 2 hours…stop there. Don’t spend the extra 2 (or 10) hours to get it to 100%.

It’s likely you could spend that 2 hours on something more valuable.

This has also happened to me dozens of times:

As soon as a project is done, it’s out of date.

Things move fast and change is the only constant.

Don’t burn yourself out or spend unnecessary time on a resource or project that’s ephemeral.

Lastly, “perfection” is all relative.

You may think something is perfect…until you see the customer’s reaction!

You might as well get the feedback on the 90% version before you spent the extra 3 hours agonizing over the part they didn’t care about!

Yes, there’s always exceptions.

• Sales targets! You want to reach those 100% and beyond 😉

• Very important meetings. Occasionally — there will be meetings or initiatives that are worth spending extra hours on. But do it intentionally not compulsively.

• Product features. Software developers are cringing right now because they think I’m telling them to ship dog shit. Releasing a feature at 95%??? ARE YOU CRAZY?? So, product is an exception (kind of). I know the last 10% of a feature release is the hardest — all the edge cases and details. So maybe you can’t ship at 90% complete without breaking your whole product. BUT — the concept of speed over perfection still holds!

“What if my superpower is doing things perfectly?”

I know a handful of amazing humans who are “maximizers.”

Their vision or attention to detail accelerates something to the next level.

Or, another variation, they are willing to put in 100 hrs/wk week after week to be the best. They will do the extra things that no one else will. They thrive on it.

If this is you, awesome!

You do you.

I see the results and they are fantastic.

I will also ask — just a double check — is there anything that could be done to a slightly lesser degree and get the same impact?

Could you reallocate an hour or two to sleep, another high value project, or working “on” the business instead of “in” the business?

I’m not saying you shouldn’t care.

You should absolutely, definitely still be obsessed with customers and doing high quality work.

I’m not saying to deliver half-ass crap to the market and expect it to be fine.

There’s a ginormous difference between 95% effort (impressive) and 60% effort (uninspiring).

You can care deeply and not be perfect.

Just look at every parent on the planet! 😂🥴🙃

Time is a finite resource and perfection is the enemy of time (and startups)!

Regularly audit how you’re using it and cull or tweak whatever is not valuable.

Speed is one of the competitive advantages you have. Leverage it to the max!

What things do you try to do perfectly or to full completion? When is it worth it? Do you agree that startups should avoid perfection?

I got a fantastic question during my presentation on “Go Big: The What, Why, How of a Scalable Startup” (recap of a similar talk here) at Atlanta Tech Week.

How do you scale a sales team? What are the steps or best practices to build out an early sales team? What are the stages?

Here’s what I’ve seen work (and not work) to grow the sales function at a startup!

1. Founder-Led Sales

Don’t have a sales background? That’s okay. You can learn!

Selling is a key skill of a successful founder. You sell to customers but also to investors, employees, and prospective employees.

A smart, motivated founder can figure out how to sell.

And if a founder can’t sell the product…no one else can.

Never ever, ever try to outsource this (at first).

It’s a huge red flag to investors if someone other than the founder is fundraising or selling in the early days.

(Note: It’s okay to have a technical founder and a more sales/business focused founder. That’s why co-founders exist! Just don’t try to hire someone from the outside to do this.)

2. Supported Founder-Led Sales

Once the founder has figured out the messaging, pricing, buyer, sales process enough to regularly close deals, start working on ways to make the founder more efficient and productive.

This could involve leveraging a sales-focused assistant, using AI to record and document the process, hiring a commission-only intern or cold caller to set up demos, or whatever else you identify that lets a founder sell more and faster.

This work will also be helpful when you hire your first full time sales reps!

3. Hire 2 Reps

Not sure where this came from originally but David Cummings was talking about it in 2014 so it’s been around for a while.

If you can afford it (and you should be able to with low base salaries and high uncapped commission structures), hire 2 sales reps at the same time.

Why?

• If both fail, the process, training, and/or rep selection needs work.

• If one succeeds but the other doesn’t, you know something is working. Now try to recreate it!

• Competition is good, especially in sales. It’s more fun, more learning, and more striving.

4. Make Sure They Are Scrappy

Here’s my 6 recs on hiring your first sales people.

Most important is make sure they have some sales experience (even if it’s retail sales during high school or college) but you still want someone hungry, creative, and coachable.

I’ve seen startups make the mistake of hiring someone too experienced who seems amazing on paper but doesn’t know (remember?) how to cold call, make presentations, do demos, or sell against well-funded Goliaths.

When in doubt, smart and scrappy!

Occasionally, you’ll get a business where industry experience and relationships matters a lot (Carpool Logistics who sells to automotive dealers is a great example) but this is the exception not the rule.

5. Then, Your Sales Leader

It’s fine to have a few reps before you hire a VP of Sales. Preferred even. Sometimes you can find a great sales leader who can close their own deals and also scale a team later (a la Derek Grant at Pardot then Salesloft) but it’s a big ask.

Sales is the hardest function to be a player-coach because everyone thinks you’re taking the best deals (and maybe you are — it’s hard not to want good deals — that’s why you’re in sales)!

Here is the greatest article about hiring a VP of Sales ever written. Every SaaS founder I know references these VP archetypes (The Evangelist, Mr. Repeatable, Ms. Go Big, Mr. Dashboards) by name or example.

Here is the other greatest article which explains how to hire, what questions to ask, and how to structure comp for a VP of Sales — including this updated article on VP of Sales comp.

6. How To Think About Comp

A few things to get right for early sales hires:

• uncapped commission — if they sell more than quota, let them get more commission! I like a kicker or accelerator too. If they go over quota, they get 15% more commission on every deal. This means reps won’t “hold back” deals to the next quarter.

• lower base, higher commission — much easier on company financials if you do a lower base salary balanced with a higher upside; the company pays commission when it realizes the revenue; includes avoid draws or high base reps; most reps, especially early in their career, are fine to bet on themselves with a high commission plan

• align your CAC/deal size — are you hunting rabbits, deer, or elephant? If you’re hunting rabbits, you can’t use expensive weaponry (like high marketing costs or a large, expensive sales team). This makes sense on paper but is easy to lose track of on your first sales offers or when closing deals however you can. In other words, make sure your sales process cost and complexity aligns with the contract price of your product.

David Sacks wrote an excellent and thorough blog on sales comp for tech (SaaS) companies with numbers and example plans that I’ve mentioned before. A must read!

What other advice do you have for early stage companies scaling sales? What has worked or not worked for you?

The O’Daily is OOO this week.

Spending time with family, in nature, making memories, recharging.

If you haven’t taken time off in a while, this is your reminder.

Time away is as powerful as grinding it out.

Just ask Olympic athletes about their rest days.

Or ask a founder about their energy, ideas, and clarity after time off.

Don’t Take My Word For It

Need inspiration? Here are my favorite quotes on the topic.

Software engineer David Clarke on priorities (via James Clear):

20 years from now, the only people who will remember that you worked late are your kids.

Alex Friedman, founder and investor, on why startups fail:

Idk who needs this but I’ve seen a few startups fail because of founder burn out. I haven’t seen any startups fail because a founder took a couple days off.

Adam Blitzer, Pardot co-founder & Datadog COO, on work load**:

There’s always more work to do. It will be here tomorrow. Time to go home.

**paraphrasing what he told us often at Pardot!

Extra Credit Reading

If you are in the zone, back from a recent break, or just a really big O’Daily fan…here’s 5 blogs to check out or re-read.

These picks are all about learning something fun. No work grind today!

• 6 Ways To Project Confidence Without Trying

• How To Turn Procrastination Into Your Superpower

• 7 Ways To Actually Say No

• 3 Strategies For Establishing Credibility — No Matter Who You Meet

• 5 Ways To Eat Healthy When You’re Building a Company

Are you OOO this week? If so, where?? What’s the most valuable break that you’ve ever taken? Do you have a favorite O’Daily blog? 😉

(P.S. I'll reply when I'm back!)

It’s common lore in the venture world that summertime is slow and quiet.

Founders are told:

Don’t raise in the summer. And definitely don’t raise during the last 2 weeks of December.

In fact, I say that almost verbatim right here.

Whaaaaa?

But, Kathryn, what about our dangerously low runway and the hires I need to make for growth?? WTF?????

Are you screwed or is the summer lull an exaggeration? What’s the truth about fundraising during the summer? What can you do to raise faster regardless of the calendar?

Let’s dive in! (…to the pool on a hot’s summer day? No way! Back to work!)

Truth: Deals Get Done

Deals are always getting done. Year-round.

Salesloft closed their transaction with Vista Equity on Dec 23.

At Atlanta Ventures, we have deployed millions of dollars over summer months and talk to startups all summer long.

We have portfolio companies fundraising now and are in discussion with startups raising money.

Investors are hustlers and high achievers, many coming from startup backgrounds themselves. They don’t want to take breaks or miss an opportunity.

Contrary to the jokes, the investors I know are hard working and care deeply about helping founders.

Also: VCs Have Families

Brace yourself. Surprise coming.

Investors are human!

With families even.

We’re not artificially cloned from a spreadsheet and a Patagonia Vest (…YET. Let’s see what AI can do!)

Our families may include school-aged children, aging parents, or even a (very patient and heroic) spouse.

The combination of official holidays, educational institution breaks, and the snowball of if-other-people-are-out-it’s-a-good-time-for-me-to-be-out-too make summer and late December prime time to spend with loved ones.

A truth known across the business world — which is why the biggest conferences are usually in the spring or fall (e.g. Venture Atlanta, SXSW, Dreamforce).

It’s also why Q3 is typically a slower sales quarter.

So while it’s not the European style of 6 weeks vacation (#jeally), if one partner is out for a week, then another key player is out the next week, then you have a holiday weekend, and there’s fewer events to meet at…small things add up.

It can be hard to get momentum going and feel like things are dragging.

So what the heck is a founder to do????

5 Strategies For Summer Fundraising

1. Give yourself buffer.

A “quick” raise often takes 100 meetings and 6-9 months. Make sure you have time and cash runway. It’s better to plan for summer to be slower and things move unexpectedly fast than the opposite.

2. Develop relationships early and often.

Connect with investors before you need to raise. Send regular updates so they get to know your business and see progress. The better they know you, the quicker they can move and the more they will prioritize you. Be a line not a dot.

Summer is a great time to develop relationships if you haven’t already.

Bonus: study up on investors — what they look for, insider tips, and fave blogs and podcasts.

3. Focus on customers.

You know what makes a fundraise go faster? Having amazing customer traction and growth. Yes, customers take summer vacations, but someone is always in office and ready to learn, optimize, share feedback, or get more value (and upgrade???? 🤞🤞🤞). Help them do this!

Here’s 5 tips on how to have a great customer call.

4. Do the leg work.

Figure out who your ideal investors are. Refine your elevator pitch and pitch deck. Understand what investors care about and how to grab their attention. Learn how to talk about revenue (regardless of how much you have) and make a realistic TAM slide. Prep and do meetings with friendlies so you’re ready to roll once September hits!

5. Build an incredible business.

Last but definitely not least…there’s no “short cut” better than an awesome business. Be great and light a (summer bon)fire under every investor you meet. Make it easy to say yes. This is definitely the HARDEST thing to do but results in the quickest raise.

I will tell you all the insider tips but at the end of day, nothing beats an awesome business. Annoying, I know!

What other tips do you have for fundraising during slower times of year? Have you successfully raised during the summer? What worked for you?

Continuous learning is key for startup success.

As Kyle Porter, CEO and founder of unicorn startup Salesloft says, you have to learn faster than your startup is growing.

Learning can take many forms: coaching, peer groups, podcasts, books, school, YouTube, and…one of my personal favorites for obvious reasons…BLOGS!

I already shared 3 incredible SaaS blogs.

But what about the millions of non-SaaS startups?

Yes, there’s great resources for marketplaces, consumer apps, web3, general scaling, product building, and everything in between.

Here are 6 of the best startup-focused blogs guaranteed to provide takeaways that you can use at your company today!

1. Lenny Rachitsky

📖: Lenny’s Newsletter (Substack)

• Product leader at Airbnb with “deeply researched growth, product, career advice”

• Real data and how-tos from “the early days” of successful companies — one of the most helpful resources for marketplaces especially!

#TopReads

• How to kickstart and scale a marketplace business (17 real stories)

• How the biggest consumer apps got their first 1,000 users

2. Fred Wilson

📖: AVC.com (classics), AVC.xyz (current)

• Partner at Union Square Ventures “investing at the edge”

• Thoughtful, concise writings on web3, climate, NYC, and other tech trends

#TopReads

• Employee Equity: How Much?

• The VC’s Customer

3. Molly Graham

📖: Lessons (Substack)

• COO/Head of Ops at high profile startups like Quip, Lambda School, Chan Zuckerberg Initiative, and Facebook

• Practical, strategic guidance on how to scale especially people and ops

#TopReads

• ‘Give Away Your Legos’ and Other Commandments for Scaling Startups (published by First Round Capital 👇👇)

• Duct Tape

• Startup Org Design: Design Power Centers Intentionally

4. First Round Capital

📖: First Round Review

• First Round is a VC firm known for their helpful content!

• Comprehensive, actionable content across every topic for early stage founders

#TopReads

• Finding Language/Market Fit: How to Make Customers Feel Like You’ve Read Their Minds

• Step-by-Step Fundraising Tactics from the NYC Legend Who Raised $750M

5. Mario Gabriele

📖: The Generalist (Substack)

• Best “deep dives” on founders and well-known startups

• Get a thoughtful entrepreneur biography in 15 minutes instead of 15 hours!

#TopReads

• Union Square Ventures: The Thinkers (learn more about Fred Wilson 👆👆)

• Modern Meditations: Claire Hughes Johnson

6. Andrew Chen

📖: andrewchen.com (classics), Substack (current)

• Partner at a16z “at the intersection of games + tech”

• Great insights and specifics on consumer products and apps

#TopReads

• The red flags and magic numbers that investors look for in your startup’s metrics – 80 slide deck included!

• Consumer startups are awesome, and here’s what I’m looking for at a16z (70 slide deck)

Other favorite blogs? What resources have been most helpful to you? What’s a newsletter that you read every time it hits your inbox??

It’s acquisition season here on The O’Daily!

I’ll start the bidding at $1B for 100+ blog posts and a great logo.

And that’s how you negotiate an LOI, folks!

Or is it?

Today, we’re continuing to share insider advice for acquisition-curious founders.

Specifically — how to get the best price for your company!

Here are 5 strategies (plus 2 bonus tips) for negotiating a fantastic Letter of Intent (LOI) aka price for your company’s acquisition — including insights from folks on the “buy” side of the deal!

1. Know the game.

Before even getting to the price negotiation stage, you have to know a thing or two about the acquisition world.

First of all, not every acquisition conversation is a good one. There can be significant downsides and challenges as A.T. Gimbel (an acquisition “buyer” himself back in the day) outlines.

A few other insider tips that we talked about last week but are worth mentioning again:

• be nice

• sales org engagement matters

• being financially scrappy can help your chances

And for goodness sake, if you remember nothing else:

Negotiate hard as heck at the LOI stage!!!!!!!!

It’s only going down from there! 🥴😳🙃

2. Strong fundamentals.

Once you have a sense of the playing field, it’s time to ask the big question:

Q: How do I get a great price?
A: Have a great company.

Apologies for being Captain Obvious here, but I think it’s important to clarify that while there are strategies for optimizing price, there are no short cuts.

You MUST have a good business! It doesn’t have to be perfect. But even the most talented, sales-oriented founder can’t make it through due diligence on dreams alone.

How do you run a fast marathon?

You train your face off.

Yes, there are tweaks and nuances and every once in a while someone is such a good athlete they can run 3 times, drink 12 beers the night before, and run a sub-3 hour marathon.

But that’s like 4 people on the planet so odds are it’s not you. (Definitely not me either!!!)

Same with business.

The best way to get a great price is to focus on building a meaningful, resilient business.

Good things happen when you have revenue, happy customers, and a strong team.

3. Keep your options open.

Along with strong fundamentals, have options.

Not stock options. Future-of-your-business options!

If a company has several paths — acquisition, profitability, IPO, raise & keep growing — it has the freedom to say no.

And nothing attracts PE firms, M&A teams, or investors like a company with the confidence to say no. Dealmakers can sense this.

I’m not saying it’s right, I’m just explaining the reality.

When you don’t need to be acquired is when you’re most likely to get the best offer.

Another way I’ve heard this explained is “willingness to walk away.”

(And if you’re not feeling confident, that’s totally normal and here’s tips on how to fake it ‘til you make it!)

So, what exactly does “optionality” look like?

• Investors who will support you on multiple paths

• Reasonable cap table (don’t raise too much or on bad terms)

• Hiring and revenue alignment (don’t overhire, use revenue milestones to unlock new hires)

• Flexibility to pivot if needed (at Pardot, we had integrations with 4 CRMs; Salesforce was the bulk of our customers but if they had acquired someone else, we could have doubled down on a different tech ecosystem)

4. Facilitate competition.

Behind every great M&A strategy and team is…humans.

Yes, they are experienced negotiators who know how to analyze the data and wield a spreadsheet like a knife.

But they are also susceptible to irrational human nature as the rest of us mortals.

Namely, they love to win.

Competition drives up prices because humans want things more when other people have them.

Especially ambitious, corporate M&A humans.

So — make sure you have other buyers at the table if at all possible!

The seriousness of other buyers doesn’t need to be revealed but it will drive the price up AND give you confidence.

If one company is interested, it’s likely that others are too.

It’s not uncommon to engage a “broker” to put out feelers and bring interested parties to the table. You can also do this outreach yourself or get investors and advisors to help.

Real life example: Why did the NBA drive a better media rights deal (as a multiple of revenue) than the NFL? More buyers competing over fewer products.

5. Have a great sales quarter.

Listen. I know you’re busy trying to sell your company and that’s a full time job.

But it’s really, really worth it to stay focused and drive a great sales quarter.

Don’t believe me? Denis Cranstoun, M&A specialist in NYC, commented here that sales numbers dropping is one of the biggest reasons deals fall apart. A.T. also talks about the risk of distraction on a business.

The other reason a great sales quarter can impact price is…

Recency bias, baby!!!

Had a bad sales quarter last year? No one cares!

Your most recent quarter will have the most weight. Use it like crazy in negotiations.

There’s a reason why companies double down on sales (e.g. hire outsourced resources) before an IPO.

BONUS

Two final thoughts:

1. Talk to other founders or investors who’ve been at the negotiating table. It’s likely they have stories or insights that can’t be shared publicly but may be pivotal for you. It’s an incredibly stressful time and talking to others who have been through it (even if you can’t reveal what’s going on) can also be tremendously supportive.

2. Do yourself a favor and read this awesome book on negotiation: Never Split The Difference. It will take a few hours and could make you an extra few million dollars. Pretty good ROI. 😉

And should things work out like you hope, be ready to leverage these 6 strategies to make the most of the opportunity post-acquisition!

What advice do you have for founders who want to drive the highest price possible for their startup? Any other stories or resources about acquisitions to share?

I’ve been lucky to have a front row seat for 3 startup acquisitions to publicly traded companies (Pardot to ExactTarget, ExactTarget to Salesforce, Rigor to Splunk).

It’s a wild ride and I hope everyone gets a chance to experience it.

I also worked closely with the corporate merger and acquisition (M&A) teams at ExactTarget and Salesforce — especially on the post-acquisition integration process — and have also heard many behind-the-scenes stories from founders about their experiences.

So, what’s helpful to know about acquisitions and getting acquired?

It’s probably not what you think!

Here’s the top 4 unexpected insights about getting acquired that every founder should know!

1. Being nice matters.

Before I knew the wild world of M&A transactions, I thought decisions were made with spreadsheets and slide decks based on facts, strategy, and metrics.

Silly, foolish Kathryn!

What I didn’t understand is — you have to work with the company you acquire. Definitely short term and usually (hopefully?) long term.

For the purchasing company, an acquisition is an expensive bet with no winnings until the new product is integrated into your business (and making money for you)!

To do that, you need collaboration, communication, humility, and teamwork.

In other words, you want to work with people that are reasonable and well-intentioned humans.

Now, not every company cares. But more care than you think.

And yes, you still have to negotiate, be confident, and advocate for yourself and your people. But just know that culture fit and personality DO matter.

It may be the winning factor in the deal (“I’d rather work with the team from StartupA”) or the losing one (“We looked at this space but passed because all the CEOs seemed like jerks.”)

And yes, that’s a real reason I’ve heard from a F500 leader for passing on an excellent strategic M&A opportunity.

Successful companies move too fast to spend time on assholes. Never underestimate the business value of being nice.

2. It pays to be scrappy.

Price matters to companies who want to buy you.

If two companies are pretty close in their offering but one has raised a lot less money, the acquiring company can get a much better “deal” — same tech for way less.

If a company raises a lot of money, its price goes up. They have to pay back the capital, give investors their share, and make sure there’s enough left for employees. A lower offer won’t be approved by the board.

Post-acquisition, the integration process between a corporation and larger startup is more complex and expensive.

Yes, some companies raise a lot and sell for a lot. Sometimes corporations are looking to acquire customers or revenue so the more the better.

But don’t assume that raising money to get bigger is always the best strategy for a future exit. I know many stories of smaller companies who “won” because of their size, scrappiness, and lighter cap table.

3. Sales reps have incredible sway.

One of my favorite M&A stories is about a tech startup who was acquired by a large public company…who had built the same product in-house.

Large Company built a competing product in-house. Startup Company thinks it’s done for. But the Large Company product isn’t great and Large Company reps don’t want to sell it. Startup Company builds an incredible partnership program driven by the sales reps wanting to sell their product. Large Company acquires Startup Company because they “have to” as driven by the sales org.

How amazing is that???

Venture M&A teams are often talking to company employees to find out what tools they’re seeing, what customers are asking for, and especially what sales reps are recommending or cross-selling.

A cross-selling partnership can be an M&A “try before you buy” testing ground. (Ditto for strategic investment!)

Will customers buy your product? Do sales reps want to sell it? How easy is it to sell?

If you’re hoping a partnership turns into something more, invest heavily in making the big company’s reps wildly successful.

Face time (road shows), working 1:1 with reps or pairing up your reps/their reps, a Slack channel, great technical support, executive sponsorship on both sides, and helping get deals over the finish line are all strategies I’ve seen work well.

But make sure you’re big enough and your product is mature enough for a partnership to be successful! You, not the large company, will have to do the heavy lifting to stay top of mind and help reps sell.

If you don’t get traction, it could backfire and hurt your M&A chances.

4. Negotiate early and high.

The main negotiation happens at the Letter of Intent (LOI) stage.

Yes, it seems early in the process and the instinct is “get ‘er done” asap and worry about the final price later.

BUT…

Once you sign it, it’s unlikely to go up and very likely to go down.🥴

Here’s why:

You now face a team of experienced M&A lawyers and finance folks whose job it is to uncover every possible risk, liability, or inconsistency and factor that into the deal.

• Have a line of credit? That gets taken off the sale price.

• Customer contract missing an auto-renew clause? Minus $2M.

• No double trigger in your employee stock agreements? Less another $5M.

Like when you send an enterprise deal through procurement, expect a significant haircut.

Nothing nefarious or ill-intentioned about it. Just people doing their job.

What’s in your control is understanding how it all works!

Negotiate the crap out of the LOI and prepare for adjustments in due diligence.

What advice or unexpected stories do you have about M&A learnings?

How do you negotiate a great LOI? Tune in next week when we dive in to the best strategies for leverage in an M&A negotiation.

I love sharing resources for founders!

A few examples:

• 4 strategies and 13 resources to find your Atlanta tech tribe

• 5 resources to perfect your pitch

• 7 strategies to find your startup dream job

• 3 B2B SaaS thought leaders to follow

• Plus over 100 more 😳

(You can blame “Input” — one of my Gallup Strengths. #sorrynotsorry)

And you know what else I love?
Supporting women!

I am passionate about all women leading fulfilling lives — whatever that is for them!

On this blog, I’ve spent time encouraging women to think big, encouraging men to support them, and sharing the insider info on how the biggest companies start and scale. (It is a startup blog after all. 😉)

A few examples:

• Unicorn Musings: 5 Ideas For More Billion Dollar Companies

• Part 1: 4 Strategies Unicorn Founders Embrace

• Part 2: 4 More Strategies That Unicorn Founders Embrace

• ICYMI: The What, Why, and How of Building a Billion Dollar Business

• 6 Ways Male Leaders Can Support Women

Today, we combine the two!

Here are 10 resources for women founders who are getting started, looking for community, raising money, or scaling to the next stage!

1. Growing Women Entrepreneur Network (gWen) 

• The Southeast's leading community for female founders

• A 501c3 “helping women build big-a$$ companies” with events, Slack channel, community, newsletter

• HQ: Charlotte

2. Women + Tech Monthly Meetup

• In-person, monthly gathering for women in tech at Atlanta Tech Village

• A great place to network, get actionable tips and inspiration, and find a co-founder or your next hire.

3. Female Founders Initiative

• Led by Melissa Heffner, head of VentureLab at Georgia Tech

• Open to all women founders, no GaTech affiliation needed, fully virtual

• 2 cohorts per year with weekly programming, community, mentorship

• More STEM founders than other programs (great option if you’re STEM) but it’s not required

4. All Raise

• Great online resources, data, masterclasses, content plus an annual conference

• Largest global organization supporting women founders, investors, board members in tech

• No ATL chapter that I know of (lmk if you start one!)

5. Startup Summer School

• Tuesdays during the summer at Atlanta Tech Village

• *FREE* and open to ALL!

• Great intro series for anyone thinking about a startup but not sure where to begin

• I’ll be presenting on Tues, June 11, 2024 — Intro To Startups! Registration opening soon. Check here or LinkedIn.

6. It Takes A Village 

• Pre-accelerator for underrepresented founders at Atlanta Tech Village

• 2 cohorts per year with weekly programming, mentorship, and a graduation demo day with prizes (like non-dilutive funding and free office space)

7. Tech AF

• For underrepresented founders who want to build tech but “don’t know how to code” (or where to start!)

• At-your-own-pace curriculum from Kristin Slink, a 4x non-technical software founder, who is brilliant at customer discovery that leads to revenue

8. First Pitch Friday

• Monthly in-person event for women founders

• Live pitch experience and on-the-spot feedback from VC investors

• Feeder program for Venture Atlanta

• Led by Allyson Eman (CEO of Venture Atlanta) and Christy Brown (CEO of Dr Noze Best, founder, angel investor)

9. WISE - Women Investors in the Southeast

• A database of women investors in the Southeast

• Find someone “like you” at your stage and industry

10. Startup Runway

• Connecting women founders and founders of color to their first investors

• Includes mentorship and fundraising prep, showcase event, investor intros

• 33% of presenters go on to raise significant funding

• 501c3 organization spearheaded by Valor Ventures

• 25th showcase event is on May 30, 2024!

**Bonus: The Lola + Rising Tide

While not *officially* tech resources…these are wonderful!

The Lola is an amazing co-working and community for women in Atlanta (I’m a member).

Rising Tide prodcast from Margaret Weniger shares inspirational and insightful stories of women in leadership (we chatted in this episode).

What other resources should we add to the list? If you’re a woman founder, what programs, events, communities, or content has been most helpful to you? I’d love to hear in the comments below! 👇👇

Don’t Believe Everything You Read

Last week, I shared some common criteria, metrics, and check sizes for each stage of fundraising.

As I was typing ballpark numbers per stage, I could hear founders in my head…

But, Kathryn, what about that $10M pre-seed round I heard about???

But the other day, in Techcrunch, I read about someone who raised a $50M Series A??

How did that founder raise $2M with no customers???

As someone who often knows the full story behind a press release…please, for the love of everything — don’t mistake a hyped-up, sunshine-only news story as term sheet reality!

If you hear an incredible story of an incredible raise, there’s usually some extenuating circumstances going on:

• More traction than is typical for that stage, e.g. they’re calling it a “Seed Stage” but the company has $2M+ in revenue

• A second time founder, raising from previous investors, who are happy to take a big bet on someone who has already been a winner for them

• Lots of strings attached or “hair on the deal” — yes, they raised $5M but they’re going to need a $100M exit to make any money, whereas, your $500k raise gives you the same payout at a $10M exit

• And of course, Silicon Valley pricing is often different than the rest of the country.

To be clear — this isn’t a knock on tech reporting. I love and subscribe to many tech newsletters and the reporters do an excellent job with coverage. There is simply a natural bias in what, how, and when startups share news about themselves!

Many Things Happen Very Quietly

You know what doesn’t get reported?

• Companies that have bootstrapped to solid cash flow — why would a founder publicly announce they are wealthy now? 😂

• A high customer churn rate

  • Everyone: “Look at these amazing new customers we have!”

  • No one ever: “Here are the companies we painfully lost last quarter!”

• Companies quietly closing their doors or (even worse?) being a zombie

• A really crappy work environment (okay, occasionally this makes news but it has to be really, really bad)

• Employees getting $0 at an exit because the company raised (too much) money

In The Wild: A Real Life Example

A competitor of one of our portfolio companies raised a boatload of money. $40M. It was surprising as, to our knowledge, their product was not as good.

At first, the doubts hit:

What do they know that we don’t? What are they doing better? Should we change strategy? Is our product not as good as I think? Do we need tons more money??

But the founder knew what to do:

I’m going to stay focused, talk to customers, execute our plan.

Fast forward 2 years, that competitor shut down and the portfolio company is crushing it.

It’s Not Just Tech News…

The other place where misinformation inadvertently spreads…pitch events or demo day!

Now, don’t get me wrong — pitch events and demo days are amazing!

And founders are doing their job to showcase their company to the fullest.

Just know: it’s part of the expectation to explain one’s company in the most positive way possible.

No one stands on stage to say:

Eh, I’m really struggling and I’m not sure if we’re going to be around in 6 months but we closed a few good deals last month and got a great angel check so I’m feeling cautiously optimistic even though that could change in 30 seconds.

A founder’s pitch narrative (and with good reason):

We are basically a unicorn already. Look at this hockey stick growth. Here’s 100 more reasons we’re awesome and our world domination is inevitable.

Go into a demo day or pitch event knowing the game being played.

Don’t take it to heart if someone who started at the same time as you has 2x more customers.

They might be burning tons of cash, have high churn, or got those customers through one warm connection that’s not repeatable.

Remember: when you talk about your business, it sounds amazing to everyone else!

HYPE. HYPE. HYPE.

Still don’t believe me?

Think about people you know on social media.

How often do social posts tell the full story?

Once a friend posted amazing photos from a family beach camping trip. I texted her to say I loved the photos. She said it was hot, buggy, sandy, and (direct quote) “f-ing miserable.” 😂😂😂

It’s always “best foot forward” on social, in the news, or during demo day. Nothing wrong with that, just know it for what it is!

To News or Not To News?

So, what’s a startup founder to do?

1. Get to know other founders. When you have founder friends, you see the full picture. Good, bad, ugly. This can be experienced founders as mentors, someone a stage ahead, a direct peer, or a behind-the-scenes look at a real founder journey.

2. Use the news for information. I think it’s helpful to stay up to date on startup happenings, market trends, and see how founders are positioning their companies and progress. (I love reading Hypepotamus!)

3. Know if it’s helpful or hurtful to you. If seeing what others are up to lights a fire, great! Use other’s successes to motivate and inspire you. If it’s bumming you out, giving you a distorted reality, or causing you to make hasty, short-term decisions, then minimize your exposure.

Remember — every founder has imposter syndrome and the public story is rarely the full story!

What are your favorite places for startup news? How do you balance staying up-to-date on the outside world vs staying focused on customers?