This is a guest post by Vikram Upadhyaya, Chief Mentor & Accelerator Evangelist at GHV Accelerator
Some entrepreneurs start out and create a company with an intention to make it big and spend their life working for it while there are others who launch startups with the goal of being acquired by the larger companies in the market and walk away with a huge fortune! But the important question is whether it is right to start a venture with the sole purpose of getting acquired…
Actually, there is no right or wrong as long as the focus of the entrepreneur is to grow the company organically and build a sustainable business. The roadmap of every startup can be different and how it ultimately shapes up depends on the market conditions and the company’s responsiveness. The important thing is to keep the base of the company strong, so much so that even ownership change should not impact its operations. Under any circumstances, the entrepreneur should not let the acquisition plan influence any critical decisions he/she has to take while creating the company and during the course of operations.
First of all, an entrepreneur cannot be led by the vision of getting acquired. The focus has to be on building a viable product/service and having a business model that clicks. If these basics are in place, catching the attention of buyers will not be difficult. If you are not doing anything noteworthy in the domain in which you operate, you will fail to get noticed by potential buyers. So whether you launch a venture to pursue a passion or to cash in from its acquisition, there’s no denying that you need to pursue it with equal sincerity and zeal to build a strong foundation for a business and ensure that it is built to last.
Secondly, the acquisition dream shouldn’t colour your judgement on each and every decision you make. For instance, if you have to hire your founding team, your strategy should be to find the right team that can help realize the long-term vision of the company. If you look at hiring people from the perspective of acquisition, you might end up hiring the wrong people and as a result, your startup will be doomed….and with it your acquisition dreams!
There is nothing wrong in starting a company with the goal of getting acquired but even your acquisition value will depend on the approach you take during the company’s formation days. Many potential buyers can smell that you’re desperate for an acquisition and it will end up lowering the valuation of your company.
Most of the companies that have got acquired for larger valuations are the ones that persistently work on building great businesses. There is an old saying that “companies are bought, not sold”. This means that you don’t need to chase acquirers. If the venture that you have set up is really worth it and proves its mettle, buyers will come chasing you any way. And you will then be in a better position to negotiate on your terms and get a good deal.
Your ultimate goal can be anything, but you need to work with the single-minded focus of building a highly profitable and successful business. Period…
As long as you are successful in doing that, you will control your own destiny and will be in a better position to decide if and when you want to get acquired and on your terms. Therefore, build a great product that solves customers pain points, form a sound team and build your company block by block and you will be surprised to see the final result! Who knows, you might not want to let go at all after putting in all the blood and sweat and might want to be the one in charge in taking the venture to even greater heights!
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