Start-up Seeking Acquisition? Stay Focused on External Communications

The New York Times recently ran a story looking at how Silicon Valley and its start-ups have readjusted their approach in the wake of predictions that 2016 would be the year the bubble burst.

While the so-called “great reckoning” has yet to come to pass, many start-ups heeded the warnings and streamlined operations, cut back on employee perks and embraced fiscal responsibility. The result? Start-ups that once were in danger of folding are now growing and even turning a profit.

Another outcome of this newly guarded era is how start-ups – once fixated on becoming the next Uber – are now readjusting expectations and focusing their efforts on acquisition instead.

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As the leader of a communications business that has worked extensively with start-ups that were subsequently acquired, I can tell you this new era of fiscal responsibility is definitely a step in the right direction.  A tight focus on growth, accountability and the most direct path to profitability is fundamental to ensuring a business is viewed as worthy of investment.

However, I would caution start-ups to be smart about how and where they cut those costs.

Complimentary gym memberships, catered lunches and massages are absolutely at the top of any cut list. But too often, in an effort to slash expenses, start-ups deprioritize external communications. On paper it is easy to see why. When a company is focused on growth, demand generation and customer acquisition are the key drivers. Investing in blogs, press releases, social media, analyst relations and thought leadership may seem like less of a priority.

Technology start-ups may want to rethink that approach. I have worked with dozens of start-ups that were acquired and in each case a strong external reputation was an integral part of the explanation for their eventual acquisition and higher valuation.

Based on that experience, my recommendation is always to refocus resources strategically, with the end goal of acquisition in sight. That doesn’t mean cutting all external communications; it means driving the right coverage in the right vehicles to appeal to the right influencers.

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Here are some key communications steps to consider when seeking acquisition:

  • A company doesn’t just buy assets; it buys a vision. Don’t be shortsighted and focus solely on an exit strategy. Instead, develop a long-term vision of what your products or services can do for customers, and communicate that – crisply, clearly and repeatedly.

  • A company needs to be well-recognized in order to get on the radar of acquiring companies. Your competitors are also looking to be acquired. Capitalize on your strengths to position yourself as a market leader in the press and analyst space as well as pursuing strategic award opportunities to boost your profile.

  • Prioritize product reviews and analyst relations. For many acquiring companies, this is a first step in their due diligence.

  • For additional steps, read here.

Communications, reputation, brand and image are indelible components of any company’s value proposition. Any suitor will consider these factors – and obviously many more – before making an offer. Fiscal responsibility is key, but not when it comes at the expense of managing the external reputation that can make that acquisition vision a reality.  

Stay tuned for more information about the presentation I will be giving at the Nasdaq Entrepreneurial Center, in which I will be expanding on the above and discussing case studies of start-ups who were successfully acquired.