Execution not just Exit

For a couple of years now, especially in the technology startups industry we are seeing a lot of businesses being built for the sole purpose of being acquired by one of the large players such as Google. From the outset it is clear that the business is being structured in such a way to make it appealing for acquisition, now it is important to have a clearly thought out exit strategy when seeking investment but grooming your company to be acquired by Google makes for shaky foundations.

The Googlebait Phenomenon

Google’s growing appetite for buying small technology startups has fueled a lot of innovation in the tech startup scene. So called “Googlebait” companies are appearing on an almost daily basis, positioning themselves to be the next beneficiary of the search giants bottomless “ad dollars” pockets.

Indeed it is important to work out potential exit strategies at inception but putting “all eggs in one basket” and forming the venture with this one goal in mind is risky to say the least. We are witnessing a unique time where technology startups can go from idea to launch with very little seed capital. This combined with other routes of exit such as IPO being increasingly difficult to obtain, fuels this Googlebait mentality.

Investors will be focusing as much on the execution of your business and its own revenue earning potential, as it operates and not solely at the exit. If you are hell bent at targeting Google as your exit strategy then they do make things easier for you, providing you have clear advantages that aid Google’s future business development goals. Google have a team of 15 full time employers in their acquisitions team and they have a policy of reading every pitch for acquisition.

“We see a lot of companies built to be acquired,” says John Burley, the head of Burley & Associates, a Washington-based business acquisitions services firm. “They come to us talking about how Google or some other large firm should buy them. More often than not, we decline to take these clients.”

The acquisition companies can often be reticent to take on these kinds of projects. The good news is Business Angels will have been through the acquisition process many times before so can add valuable advice, insights and the credibility which opens doors.