The discussion was titled “Getting Acquired: The Good, Bad and Ugly”, so I knew I was in for a peek behind the curtain.
The panel included David Nelsen of Giftango, Jeff Hardison of Meridian (now Aruba Networks), angel investor Chris Logan, and was moderated by Rick Turoczy of PIE and Silicon Florist (among other projects).
There was the usual tech gathering fare of pizza and microbrews, served to a diverse audience of Portland’s tech geeks, startup junkies, and creatives eager to plot their journey across downtown to the dozen companies that opened their doors to the curious networkers, regardless of the heavy rain.
The discussion was all about what happens during an acquisition: how to prepare for it, how to position yourself during negotiation, Portland from a valley investor’s perspective, and what the morning (and months) after acquisition feel like.
Here are a few of the highlights:
What Portland can learn from California
Silicon Valley has a rich history of technology start ups that have matured into the industry players we now know them to be, creating in its wake an ecosystem of investors and a culture that glorifies risk, praises innovation, and rewards serial entrepreneurship.
Although, Portland is an extremely vibrant technology hub with hoards of talented developers, we should make more of an effort to learn from the California ways of administration, sales development, and executive leadership. Successful Portland entrepreneurs should continue to invest in the Portland community by volunteering with incubator programs as mentors to new ventures (through organizations like PIE).
John Cook’s article on the event captured this quote from Jeff Hardison, which I believe touched on the deepest topic of the evening: “Portland doesn’t really celebrate companies getting big. Two of our biggest companies are Precision Castparts … and Nike, and who gets protested more in this city than those two companies,” he said. “You either grow big and face ridicule, or you sell. One thing I’d like … is for the citizens to look inside our hearts and say: Are we ready to grow big companies?”
Preparation for Acquisition
Intellectual property is extremely important, Chris Logan mentioned that during his acquisition process there were five separate IP lawyers working on his project. Be prepared to share the entire commit histories of your project, with each line of code being painstakingly evaluated.
The books and capitalization tables should be accurate and meticulously maintained, a mistake here can cost you dearly.
Take your time to research earnout plans and structure. The company that is acquiring you wants to make a considerable return on their investment and most earnout plans are structured around this. However, once they acquire your organization, they “rule the roost”, so make sure your earnout plan is structured in a way that still gives you adequate control to make success possible. It’s also important to consider your early investors that believed in you, don’t short change them by sweeting your own deal as you want to keep a confident stable of investors that are eager to work with you during future projects.
When the question was raised, “How do you know when to walk away?”, each panelist interrupted each other in order to answer. Most agreed that you always have to be prepared and ready to walk away from an acquisition negotiation. Jeff Hardison mentioned the book “Start with No”, that he says discusses that when you retain the leverage to say no to a deal (and do), there’s an emotional reaction from the other party to come back to the table.
During the post panel TechCrawl, I visited Puppet Labs’ studio, talked to a few members of their team, and snacked on the Mediterranean banquet.
Once you get started having awesome conversations with like minded and interesting Portland technologists, it’s easy to lose track of time. I only wish the TechCrawl lasted all day so I could have visited each of the companies and developed an even greater sense of how much I love this city and its community of creative professionals.